NEW YORK (
-- Baker Hughes
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.
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Highlights from the ratings report include:
- BHI's revenue growth has slightly outpaced the industry average of 14.2%. Since the same quarter one year prior, revenues rose by 18.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- BHI's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, BHI has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
- BAKER HUGHES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, BAKER HUGHES INC increased its bottom line by earning $3.97 versus $2.00 in the prior year. For the next year, the market is expecting a contraction of 8.8% in earnings ($3.62 versus $3.97).
- Net operating cash flow has significantly decreased to -$76.00 million or 200.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Energy Equipment & Services industry average, but is greater than that of the S&P 500. The net income has decreased by 0.5% when compared to the same quarter one year ago, dropping from $381.00 million to $379.00 million.
Baker Hughes Incorporated supplies oilfield services, products, and technology services and systems to the oil and natural gas industry worldwide. The company has a P/E ratio of 9.9, equal to the average energy industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Baker Hughes has a market cap of $17.16 billion and is part of the
industry. Shares are down 19.5% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.