Baker Hughes (BHI) Gains Despite Downside Guidance

NEW YORK (TheStreet) -- Baker Hughes (BHI) rose 2% to $52.85 Friday despite issuing a downside guidance that falls below consensus estimates.

Baker Hughes issued fourth-quarter guidance with the company set to earn between 70 cents to 80 cents a share, excluding some Iraqi disurptions. Analysts surveyed by Capital IQ expected 83 cents a share in the quarter.

The oil company said a protest incident forced a suspension of operations at a facility in Iraq, which will cut into profit. Baker Hughes expects the incident to cut profits by about $80 million. With the Iraq disruption, Baker Hughes now expects earnings per share of 60 cents to 62 cents.

Baker Hughes also announced it had repurchased about 6.3 million shares of common stock totaling $350 million during the fourth quarter.

TheStreet Ratings team rates BAKER HUGHES INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BAKER HUGHES INC (BHI) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Energy Equipment & Services industry average. The net income increased by 22.2% when compared to the same quarter one year prior, going from $279.00 million to $341.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 8.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • BHI's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.43, which illustrates the ability to avoid short-term cash problems.
  • Compared to where it was 12 months ago, this stock has enjoyed a nice rise of 28.34% which was in line with the performance of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, BHI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

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