Baker Hughes’s Returns in Context: An Industry Comparison
Baker Hughes’s returns compared with the industry
Baker Hughes, a GE Company (BHGE), has seen its stock price fall 10% in the past year (as of August 17, 2017). OFS (oilfield equipment and services) industry peer Halliburton has fallen 17% during the same period. (Refer to Market Realist’s series Baker Hughes’s Weakness despite Synergy Opportunities for more.)
The Energy Select Sector SPDR ETF (XLE) has returned -13% since August 17, and BHGE has underperformed the VanEck Vectors Oil Services ETF (OIH), which has returned -27% in the past year. OIH is an ETF tracking an index of 25 OFS companies.
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By comparison, the SPDR S&P 500 ETF (SPY) has significantly outperformed BHGE, returning 11% during the same period, while the Dow Jones Industrial Average (DJIA-INDEX) has surged 17% in the past year.
Crude oil price and US rigs
Since August 18, 2016, the WTI (West Texas Intermediate) crude oil price has fallen 3%, but in 2017 so far, crude oil prices have been volatile. (You can read more about the latest on crude oil prices in Will US Crude Oil Production Overshadow Inventory Draws?)
Prompted by a steadier price of crude, the US rig count has risen 97% in the past year. The rig count typically indicates upstream companies’ activity trends and is an indicator of OFS companies’ revenues and earnings. (You can read about how OFS companies like Schlumberger (SLB) and Weatherford International (WFT) have been faring in recent times in Market Realist’s SLB, HAL, NOV, WFT: How They Stack Up after 2Q17.)
In this series, we’ll analyze relative valuation multiples, what market indicators are saying about BHGE’s stock, and the Wall Street analysts’ recommendations on Baker Hughes.
Let’s start with Baker Hughes’s historical valuation multiples.