Baker Hughes +1.5% as Goldman upgrades to Buy

Baker Hughes (BHI +1.5%) is upgraded to Buy from Neutral with a $72 price target, up from $60, at Goldman Sachs, based on increased forecasts for pressure pumping and expected margin improvement.

BHI is second only to Halliburton (HAL) in exposure to U.S. land, but its operating margins have lagged HAL’s; the firm has been skeptical of BHI's ability to improve North American margins to mid-teens by H2 2014, but has grown more optimistic now that rig activity is stronger than expected and pressure pumping prices could go higher.

Consensus estimates do not reflect the potential for improvement, which the firm sees an opportunity; also, despite a strong run YTD, BHI’s valuation looks compelling.

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