- 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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