New GE-Baker Hughes Company Could Compete With The Likes Of Halliburton

Argus likes the agreement between General Electric Company (NYSE: GE) and Baker Hughes Incorporated (NYSE: BHI) based on its creation of a new firm, combining the oil and gas units for the following factors:

• The integrated energy services firm could take on the likes of Halliburton Company (NYSE: HAL) or Schlumberger Limited. (NYSE: SLB) more effectively.
• GE’s digital technology would support Baker Hughes’ offerings in service and equipment.
• The deal has a bright chance of getting regulatory approval.

As a result, analyst Bill Selesky reiterated Buy rating and boosted the target price by $9 from $56 to $65 on Baker Hughes shares.

In a research note, the brokerage stated, “We have a positive view of the proposed combination with GE Oil & Gas, as GE’s strength in digital technology should complement BHI’s traditional energy services and equipment offerings. The expanded company should also be better able to compete with Halliburton and Schlumberger. Meanwhile, Baker Hughes continues to pursue a substantial restructuring program designed to reduce annual costs by $500 million and to strengthen its financial position.”

Additionally, Argus narrowed its loss estimate from $2.14 a share to $1.83 a share for the year 2016 to reflect the third-quarter results. The firm thinks the December quarter results might gain from cost-cutting.

For the year 2017, the brokerage lifted its estimate from a loss per share of $13 to EPS of $0.33 to reflect improving oil prices and right activity.

At last check, Baker Hughes was down 1.53 percent at $54.55, while GE was down 0.33 percent at $29.

Image Credit: By Gerd Fahrenhorst (Own work) [GFDL or CC BY 3.0] via Wikimedia Commons