Last Update03 Oct 25Fair value Increased 1.75%
The analyst price target for Baker Hughes has increased modestly to approximately $51.43. This reflects a blend of stronger Industrial & Energy Technologies momentum, successful acquisitions, and improved revenue diversification, according to analysts.
Analyst Commentary
Recent street research on Baker Hughes reflects a range of views, with bullish analysts highlighting the company's momentum in Industrial & Energy Technologies, successful acquisitions, and robust financial performance. Others express some caution regarding prevailing sector challenges and market dynamics.
Bullish Takeaways- Bullish analysts are encouraged by the growing contribution of Industrial & Energy Technologies, which now accounts for more than half of the company’s pro-forma revenue and reflects diversification away from traditional oil and gas markets.
- The acquisition of Chart Industries is viewed as a catalyst for accelerated growth and increased presence in new energy and power segments, supporting higher medium-term valuations.
- Several raised price targets are justified by better-than-expected Q2 results, improved guidance, and achievable synergies from recent transactions. These factors support long-term earnings potential.
- Strong order visibility and demand from data centers and new energy end-markets point to sustained revenue flow and improved execution. This further supports confidence in current and future performance.
- Bearish analysts note continued softness in certain segments, particularly Oilfield Services & Equipment, which tempers the overall growth narrative despite IET’s progress.
- There is concern that oil service stocks have underperformed broader equity benchmarks and that further upside might be limited until estimates show renewed momentum.
- Some skepticism remains regarding ongoing challenges in major international markets like Saudi Arabia and Mexico, which could overshadow growth in other regions and weigh on valuation.
- Certain analysts have lowered their price targets on the stock due to negative catalysts so far this year and limited clear near-term market catalysts. This makes a range-bound performance more likely.
What's in the News
- Baker Hughes is close to finalizing a $13.6 billion cash deal to acquire Chart Industries, which would significantly expand its presence in liquefied natural gas, nuclear energy, and data center markets (Financial Times).
- The company secured an award from Bechtel to supply key liquefaction equipment for Sempra Infrastructure's Port Arthur LNG Phase 2 project in Texas. This supports an added capacity of approximately 13 million tonnes per annum.
- Baker Hughes received a significant award from Petrobras to supply up to 50 subsea tree systems and associated services for multiple offshore fields in Brazil. This aims to enhance recovery and optimize new wells.
- A multi-year agreement was announced with Petrobras to extend the deployment of Blue Marlin and Blue Orca stimulation vessels, supporting offshore production in Brazil and marking notable achievements in health and safety performance.
- Baker Hughes will provide main liquefaction equipment for Train 4 of NextDecade's Rio Grande LNG Facility in Texas. This will add about 6 million tonnes per annum of LNG capacity with advanced, energy-efficient technology solutions.
Valuation Changes
- Consensus Analyst Price Target has risen slightly from $50.55 to $51.43, reflecting increased confidence in the company’s outlook.
- Discount Rate has decreased marginally from 7.73% to 7.60%. This suggests analysts see a modestly lower risk profile for the business.
- Revenue Growth expectations have declined fractionally from 1.79% to 1.75% for upcoming periods.
- Net Profit Margin estimates have edged down from 9.98% to 9.96%.
- Future P/E ratio has increased modestly from 21.21x to 21.56x. This indicates a slight elevation in valuation multiples applied to earnings projections.
Key Takeaways
- Expansion into energy transition markets and digital infrastructure positions Baker Hughes for higher-margin growth and recurring revenue.
- Portfolio optimization and technology-driven offerings enhance margins, recurring revenue, and long-term earnings durability.
- Heavy reliance on volatile oil and gas markets, cost pressures from tariffs and supply issues, plus exposure to policy changes and execution risks, threaten consistent profitability and stable growth.
Catalysts
About Baker Hughes- Provides a portfolio of technologies and services to energy and industrial value chain worldwide.
- Baker Hughes is actively expanding into fast-growing markets like distributed power solutions for data centers and new energy infrastructure (hydrogen, CCS, geothermal), capitalizing on the robust increase in global energy demand-especially from digital infrastructure and emerging markets-which positions the company for long-term recurring revenue growth and higher-margin opportunities.
- The company's strong momentum in securing large-scale service contracts, framework agreements, and technology-driven orders (such as for data centers, LNG, CCS, and recurring gas tech services) is driving an all-time high IET backlog, building strong visibility into future revenue and supporting sustained earnings durability.
- Portfolio optimization-highlighted by recent divestitures and targeted acquisitions such as CDC-enables Baker Hughes to recycle capital into higher-growth, higher-margin, and less oil-price-sensitive segments, structurally improving margins and setting up future EBITDA/earnings expansion.
- Increasing customer focus on decarbonization, efficiency, and grid reliability is accelerating demand for Baker Hughes' proprietary digital, automation, and energy transition technologies (e.g., Cordant Solutions, Leucipa, hydrogen-ready NovaLT turbines), enhancing pricing power, expanding service attach rates, and increasing the mix of high-margin recurring revenue, which should support margin expansion.
- Implementation of Baker Hughes' business system and structural cost initiatives is driving multi-year improvements in operating leverage and net margins (demonstrated by 600 bps margin expansion over 5 years), with management targeting further gains that will compound the impact of revenue growth on long-term earnings and free cash flow.
Baker Hughes Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Baker Hughes's revenue will grow by 1.8% annually over the next 3 years.
- Analysts assume that profit margins will shrink from 11.0% today to 10.0% in 3 years time.
- Analysts expect earnings to reach $2.9 billion (and earnings per share of $3.01) by about September 2028, down from $3.0 billion today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.2x on those 2028 earnings, up from 14.7x today. This future PE is greater than the current PE for the US Energy Services industry at 15.0x.
- Analysts expect the number of shares outstanding to decline by 0.37% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.73%, as per the Simply Wall St company report.
Baker Hughes Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The company faces ongoing risks from global trade policy shifts, including newly announced and potential future tariffs (e.g., U.S.-China, steel, aluminum, and copper tariffs), which could lead to additional cost pressures, supply chain disruptions, and margin compression not fully captured in current guidance; this threatens future EBITDA margins and net earnings.
- While Baker Hughes is successfully diversifying into new energy and digital solutions, the business remains significantly exposed to the volatile upstream oil and gas market, which is experiencing high single
- to low double-digit spending declines in key regions; this structural exposure risks sustained revenue headwinds and unpredictable earnings if decarbonization efforts accelerate or oil demand falters.
- The company's long-term growth forecasts rely heavily on expanding LNG, natural gas, and data center power solutions, but these sectors are vulnerable to policy shifts favoring renewables, electrification, or stricter ESG regulation; faster-than-anticipated adoption of clean energy solutions and electrification could erode the addressable market and pressure long-term revenue growth.
- Persistent cost inflation, supply chain tightness in gas tech equipment, and increasing customer expectations for lower service costs contribute to ongoing pricing pressure and potential margin erosion, particularly if Baker Hughes cannot maintain operational efficiencies at the current pace; these factors threaten both net margins and free cash flow generation.
- The continued need for portfolio optimization, including active divestiture of non-core assets and frequent M&A, introduces execution risk and may not yield sufficient improvement in recurring revenue or margin profiles; integration challenges, missteps in capital allocation, or underperformance of new acquisitions could adversely impact earnings stability and overall financial performance.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $50.545 for Baker Hughes based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $37.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $29.1 billion, earnings will come to $2.9 billion, and it would be trading on a PE ratio of 21.2x, assuming you use a discount rate of 7.7%.
- Given the current share price of $45.45, the analyst price target of $50.55 is 10.1% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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