BKR: Sector Activity Rebound And Divestiture Plans Will Shape Risk-Reward Ahead

The average analyst price target for Baker Hughes has increased modestly to approximately $52.52 per share. This reflects analysts' expectations for improving sector momentum and upcoming strategic catalysts, despite a still cautious macroeconomic environment.

Analyst Commentary

Industry analysts continue to weigh both the positive catalysts and ongoing headwinds influencing Baker Hughes' outlook. Recent commentary highlights several factors currently shaping sentiment toward the stock.

Bullish Takeaways

Bullish analysts cite an improving sector backdrop. They note that oil and gas activity has recently rebounded, which is viewed as a signal that the sector may be moving past its lowest point.
There is confidence in Baker Hughes’ ability to execute on strategic catalysts, including upcoming divestiture announcements and ongoing backlog growth that is expected to drive future performance.
Recent adjustments to price targets reflect expectations that long-cycle and production-focused names like Baker Hughes could be well positioned to benefit from industry recovery trends and structural tailwinds.
Analysts view Baker Hughes’ ongoing adoption of advanced technologies, such as artificial intelligence, as a transformative factor supporting longer-term growth and positioning the company at the forefront of a potential industry revolution.

Bearish Takeaways

Despite recent optimism, bearish analysts caution that renewed concerns around commodity prices, as seen with WTI oil dipping below $60 per barrel, could dampen near-term earnings expectations and activity levels.
Leadership transitions, including changes within key operational roles, have introduced some execution risk. There are concerns about whether operational momentum can be maintained.
The macroeconomic environment remains challenging, with further activity cuts and volatility possible. This suggests that upside potential could be more of a long-term rather than imminent event.
Bearish analysts continue to be cautious on U.S. land-related operations, where upside is viewed as a later-cycle recovery, potentially not materializing meaningfully until 2026.

What's in the News

Ananym Capital Management has built a stake in Baker Hughes and is urging the company to consider selling or spinning off its oilfield services equipment business to unlock shareholder value (Bloomberg).
The Trump administration is reportedly drafting a plan to resume offshore oil drilling along California's coast for the first time in decades. This move could impact Baker Hughes among other sector players (Washington Post).
Baker Hughes has been awarded a contract by Bechtel Energy to supply primary liquefaction equipment for Train 5 at NextDecade's Rio Grande LNG Facility in Texas, supporting an additional 6 million tonnes per annum of LNG capacity.
NMDC Energy PJSC signed a strategic Memorandum of Understanding with Baker Hughes in Saudi Arabia to explore greater localization of Baker Hughes products and solutions for the MENATI offshore markets.
Baker Hughes secured a multi-year agreement to expand its underbalanced coiled tubing drilling operations for Aramco across Saudi Arabia’s natural gas fields. This agreement will increase its fleet from four to ten units.

Valuation Changes

Consensus Analyst Price Target has risen slightly from $52.43 to $52.52 per share, reflecting a modest increase in fair value estimates.
Discount Rate has fallen moderately from 7.63% to 7.22%, suggesting analysts now view the company’s risk profile as slightly lower.
Revenue Growth projections have increased from 2.28% to 3.02%, indicating a more optimistic outlook for top-line expansion.
Net Profit Margin has decreased marginally from 10.48% to 10.17%, pointing to slightly lower expected profitability.
Future P/E has edged down from 20.57x to 20.54x, indicating little change in anticipated earnings multiples.

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.What are the underlying business or industry changes driving this perspective?

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 Earnings and Revenue Growth

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.

How well do narratives help inform your perspective?

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.

BKR: Broader Energy Transition And Asset Portfolio Moves Will Shape Medium-Term Outlook