Trade of the Day: Baker Hughes Incorporated (BHI) Swimming in Upgrades

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Baker Hughes Incorporated (NYSE:BHI) — Baker Hughes is one of the world’s largest oilfield supply companies and, like most companies associated with crude oil, it suffered a loss last year. However, with crude oil now at close to $50 per barrel, it is showing revenue and earnings improvements.

On Tuesday, this big-cap oil field supplier surprised most analysts by posting $600 million in third-quarter savings vs an expected $500 million for the second half of 2016, and according to Credit Suisse it expects to realize $650 million in total saving through this year.

As a result, Wall Street’s analysts are scrambling to revise price targets and revenue estimates: Credit Suisse picks BHI as one of its favorites in the Oil Field Services Group, Zacks and Stephens Research raised it to “overweight,” and Cowen & Co went from “market perform” to “outperform.”

In other words, Wall Street analysts like what they see, and CS raised its target from $56 to $61 but admits that these objectives are dependent on oil prices of $55 to $65 to see improvement in the North Sea and West Africa. Credit Suisse estimates earnings per share of -$1.63 in 2016, then an improvement to 81 cents in 2017, and $2.30 in 2018.

Tuesday’s report made me put this stock on my “Buy List” after viewing it for readers since the CBR Buy signals in August/September. The chart is very bullish with bull market “step-ups” starting in August. Tuesday’s step-up was accompanied by a break-away gap from $52.48 to $53.88 and was pushed by higher-than-average volume.

But gaps (even break-away gaps) after long runs like this are often closed by profit-taking. Thus, try to buy BHI at the partial close of $53 for a trade to $60 for a proposed profit of 13%. This stock, because of the quality of its management and financial situation, is qualified to be bought as a long-term investment in the oil services sector.

BHI B53 T60
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Trade of the Day: Baker Hughes Incorporated (BHI) Swimming in Upgrades


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