- It's time to buy Baker Hughes (BHI -0.2%) now that the dust has settled regarding the company's merger with General Electric's (GE +0.6%) oil and gas business, Guggenheim analysts say.
- Guggenheim estimates the new company will generate $4.9B in EBITDA in 2018 - a bit less than the $5.2B-$5.5B forecast by the companies - and should trade at a peer average 10.6x EBITDA, implying a fair value for BHI of ~$63, but the firm believes synergies provide another ~$4 of upside if GE is able to realize greater cost savings.
- The firm also finds the industrial logic is sound: As Schlumberger (SLB -0.1%) has shown, regional and product line diversity enhance through-cycle returns and cash flow, which are benefits that the new BHI should be able to realize as a result of its pro forma portfolio.