FBR's Thomas Curran Is Buying The Likelihood Of A Halliburton-Baker Hughes Merger

In a report published Wednesday, FBR analysts Thomas Curran and Benjamin Tainter looked into Baker Hughes Incorporated (NYSE: BHI) and Halliburton Company (NYSE: HAL) after the deal spread surged to the highest level in six months.

The firm assures it is a buyer of Baker Hughes at current levels and still believes the closing of the deal is highly likely. The experts see a potential return of 28 percent or more over the next four to nine months.

Related Link: Morgan Stanley Has Increased Conviction On Halliburton-Baker Hughes Deal, Raises Targets

The report continues, “Last week's Bloomberg article, which catalyzed the re-widening, in our view, proved devoid of new material information and stoked concerns that are readily debatable.” Moreover, since that moment, the analysts have identified other positives that suggest the deal will probably go through.

Separately, the firm is further recalibrating its NAM margin trajectories for both companies, following their outlook updates. They now expect EPS of $1.54 for Halliburton in 2015 (up from $1.31) and EPS of $1.68 in 2016 (down from $1.85). For Baker Hughes, they are modeling a net loss of ($0.28) in 2015, down form ($0.16), and EPS of $1.02 in 2016, down from $1.35.

Related Link: Halliburton Has 90% Upside Long-Term, Citi Says

FBR maintains an Outperform rating and $75.00 price target on shares of Baker Hughes and a Market Perform rating and $50.00 price target on shares of Halliburton.