BKR - Embedded Expectations Analysis - 2021 02 11
Baker Hughes Company (BKR:USA) currently trades near historical lows relative to UAFRS-based (Uniform) assets, with a 1.5x Uniform P/B. At these levels, the market has bearish expectations for the firm, and management may be concerned about free cash flow, order growth, and natural gas demandSpecifically, management may lack confidence in their ability to sustain free cash flow growth, execute on the three pillars of their strategic goals, and further reduce costs. In addition, they may be exaggerating the potential of the C3.ai partnership and the stability of their 2021 oil and gas outlook. Management may also be concerned about customer efforts to decarbonize and the efficiency of their LNG equipment. Furthermore, management may lack confidence in their ability to improve Oilfield Services segment margins, drive orders in Oilfield Equipment and Digital Solutions, and sustain service order growth. Moreover, they may have concerns about methane leaks and the sustainability of natural gas and liquefied natural gas (LNG) demand. Finally, management may be exaggerating their focus on rightsizing the business and optimizing their portfolio, and they may lack confidence in their ability to mitigate international revenue declines and secure more Bently Nevada business contracts
Baker Hughes is an energy technology company. The company's segments are: Oilfield Services, which provides products and services for onshore and offshore operations ranging from drilling, evaluation, completion, production, and intervention; Oilfield Equipment, which provides products and services for the subsea, offshore surface and onshore operating environments; Turbomachinery and Processing Solutions, which provides equipment and related services for mechanical-drive, compression and power-generation applications; and Digital Solutions, which includes condition monitoring, industrial controls, non-destructive technologies, measurement, sensing, and pipeline solutions.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
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- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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