Stock Analysis
Baker Hughes Company (BKR)
NASDAQ: BKR · Energy Technology & Industrial Equipment
Updated
Rated Watchlist, with a fair value of $56.98 against a last close of $54.40 (+4.7% implied upside). The shares slipped under $55 before the Chart quarter is tested on 27 October, and with fair value lower the price that pays for the risk is now $50.
- Verdict
- Watchlist
- Fair Value
- $56.98
- Investment Score
- 60.6/100prev 64.8
Technical read (chart only): Confirms as of Breakdown to a new 60-session closing low under the 200-day average, which agrees with waiting; watch whether the 20-session low of $53.44 holds, and treat a close back above the 200-day near $59.85, then a higher low, as the turn.The Watchlist verdict comes from the fundamentals alone. The technical read looks only at the price chart. It does not change the verdict or the score and only guides entry timing.
Investment Scorecard
Composite score 60.6/100 (previous 64.8). Every factor is scored out of 10, ten always being the best outcome, including for risk.
| Factor | Score | Weight | Change | Basis |
|---|---|---|---|---|
| Business Quality | 7/10 | 16% | unchanged | Unchanged. Gas-infrastructure, LNG and power equipment with a long services tail, against roughly a third of profit in cyclical oilfield work. |
| Financial Strength | 5/10 | 16% | unchanged | Unchanged. Pro forma net debt about $15.7bn, near 3.0x guided 2026 EBITDA against a 1.0-1.5x target for 2H 2028; buyback suspended; Waygate proceeds not yet received. |
| Competitive Advantage | 7/10 | 16% | -1 vs last report | Down 1. The LNG compression base is strong, but in power islands the company shares the new Venture Global framework with GE Vernova, so the growth market is contested. |
| Management | 6/10 | 10% | -1 vs last report | Down 1. The June quarter beat the top of the EBITDA guide, but the cash guide was cut within seven weeks of the Chart close and Chart's first half disappointed; 27 October has to show it was a one-off. |
| Growth Potential | 7/10 | 16% | -1 vs last report | Down 1. Record $40.1bn backlog and a new power framework, but 2027 consensus slipped to $2.96, the Chart margin ramp sits in 2028 and the new framework delivers only from 2028. |
| Valuation | 5/10 | 16% | unchanged | Unchanged. 18.4x 2027E and about 4.1% free cash flow yield on guided conversion; the price sits 9% below the base case. |
| Risk (10 = lowest risk) | 5/10 | 10% | unchanged | Unchanged. A full year of Chart profit still rests on one quarter, results arrive in eight trading days, and leverage sits above target as rate-hike talk returns. |
Recent Developments
| Date | Development | Impact |
|---|---|---|
| 2026 guidance update: revenue and EBITDA raised, FCF conversion cut, Chart margin near 17% Adjusted EBITDA guided to $4.875-5.475bn; free cash flow conversion 40-45%; Chart EBITDA $300-400m from the 16 July close, weighted to Q4; Chart 2H'28 margin target 22-23%; leverage target 1.0-1.5x by 2H'28. Reading: Still the test the rating waits on, on 27 October. The earnings effect is small; the multiple effect is not, with values of about $48.60 on a miss and $64.30 on a clean quarter against a $59.20 base. | High | |
| Power frame agreement with Venture Global and GE Vernova Up to 16 power island units of 720 MW each, with gas and steam turbines, equipment and services; Baker Hughes also supplies controls and electrical integration for each island; deliveries 2028-2034; value not disclosed; a framework, not a firm order. Venture Global expects its first purchase order by end-2026. Reading: Supports the power growth leg and 2027 orders if purchase orders follow, but no effect on 2026-27 earnings, the work is shared with GE Vernova, and it deepens reliance on one customer. | Medium | |
| Venture Global awards for the Cloud Connector pipeline and the Plaquemines expansion 13 Frame 5/2E gas compression systems and four liquefaction blocks with Chart cold boxes; value not disclosed. Reading: Evidence that compression plus Chart liquefaction sells as one package; supports rather than raises the IET order guide. | Medium | |
| Sale of Waygate Technologies to Hexagon All-cash, about $1.45bn before adjustments; close expected in the second half of 2026; no closing announced by 16 October. Reading: The nearest source of deleveraging; a Q4 close would lower year-end leverage. | Medium | |
| Venezuela gas alliance and New Stratus Energy MOU Non-binding cooperation framework and MOU; projects need definitive agreements and US sanctions authorisations. Reading: Option value only; no value or timetable. | Low | |
| Q3 2026 results dates Release on 27 October at 5 p.m. ET; webcast on 28 October at 9:30 a.m. ET. Reading: The dated test for the Chart ramp and cash conversion. | Low |
Key Risks
| Risk | Probability | Severity | Comment |
|---|---|---|---|
| Chart's 2026 profit concentrated in Q4 | Medium | High | Guided weighting to one quarter; brokers trimmed Chart estimates in late September. |
| Chart margin ramp slips beyond 2028 | Medium | High | About 17% now against 22-23% targeted for 2H 2028. |
| Data-centre power demand cools | Medium | High | AI infrastructure shares sold off this month; a deferral of orders would hit the growth case. |
| Backlog fails to convert at booked margin | Medium | High | Delivery slots are the constraint; $40.1bn of RPO. |
| Multiple compression toward oilfield peers | Medium | High | 18.4x 2027E still assumes part of an industrial re-rating. |
| Cash conversion stays below plan into 2027 | Low-Medium | High | Attributed to one-off acquisition costs; unproven until a quarter shows it. |
| Leverage and cost of debt | Medium | Medium | Pro forma net debt about $15.7bn; ten-year at 5.10%; buyback suspended. |
| Customer concentration in Venture Global | Medium | Medium | LNG technology, compression, liquefaction and now power with one developer. |
| Oilfield services keeps declining | Medium | Medium | OFSE revenue down 5% in Q2; rig count steadier. |
Scenario Analysis
| Case | Probability | Fair Value | Outlook |
|---|---|---|---|
| Bull | 22% | $71.50 | Q3 shows the Chart ramp on track and Q4 lands at the top of its range; conversion recovers above 50% in 2027; Venture Global places its first power island order; 2027 EPS about $3.25 at 22x. |
| Base | 50% | $59.20 | Chart delivers within its range; conversion 40-45% in 2026, improving in 2027; consensus 2027 EPS of $2.96 holds at 20x, the middle of the shares' recent band. |
| Bear | 28% | $41.60 | Chart misses its Q4 weighting and the 2028 margin target slips; conversion stays weak and OFSE softens; 2027 EPS about $2.60 at 16x, nearer oilfield peers. |
The Case
Baker Hughes at $54.40 trades at 18.4 times 2027 consensus and about a 4.1% free cash flow yield on guided conversion. The company keeps adding orders and options, most recently a power frame agreement with Venture Global for up to 16 power islands, but that work delivers from 2028 and the test that matters, Chart's fourth-quarter ramp and 40-45% cash conversion, arrives with the 27 October results. With 2027 estimates lower, the base case is worth $59.20, under 10% above the price, against a bear case near $41.60. Fair value is $56.98; the rating stays Watchlist, with $50 or below, or a 200-day reclaim after confirming results, as the levels to act on.
Archived Reports
Beating The Bull keeps every past version of this report on file. Verdicts and numbers reflect what was known when each one was published.
Informational use only. Not financial advice.