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Baker Hughes
is trading lower on Thursday, a day after
General Electric
announced its intention to reduce its stake in the energy company. Still, that could be a good thing, argue the analysts.
L & # 39; s back story. General Electric's (symbol: GE) commitment in Baker Hughes (BHGE) dates back to 2017, when it merged with GE Oil & Gas. However, since that time, GE has had a lot of problems, and so it's been a long time since we speculated on the timing of the eventual sale of part of its stake in Baker Hughes in order to reduce its debt .
On Wednesday, GE finally announced its intention to sell about $ 3 billion of Baker Hughes shares, which would take it from a majority owner, with just over 50% of the company, to a minority stake, with approximately 39%. l & # 39; interests. (Barron we discussed what it means for GE itself yesterday.) Baker Hughes is up 2% since the beginning of the year, compared to
S & P 500
19% and a 29% increase for GE.
What's up. Given that the sale of GE's shares is not really a surprise, analysts are largely happy to finally have real numbers.
CowenS Marc Bianchi reiterated an outperformance rating and a $ 30 price target on Baker Hughes after the news. He writes that the sale of GE will remove a much-awaited surplus for the stock, while "Baker Hughes' $ 250 million stock buyback suggests that management has a favorable outlook for activity despite the "recent" information contained in the prospectus. " According to Bell, this dynamic could cause third quarter activity to be postponed to the fourth quarter, a "precautionary statement" more than an alarm bell.
StifelS Stephen Gengaro GE has described GE's partial divestment as a "positive step" towards removing uncertainty about conglomerate ownership. (Many in the street are waiting for GE to gradually reduce its stake in multiple transactions.) "As GE has repeatedly indicated, this exit seems orderly," he wrote. "Among the other benefits for Baker Hughes, there is the reduction of GE's majority stake and the reduction in the number of seats on GE's board of directors from five to one." Although he was not surprised by the weakness of Baker Hughes' stock, he reiterated a purchase price and a price target of $ 34.
Look to the front. Although analysts can rejoice, the markets are not yet convinced. Baker Hughes shares are down 1.6% to $ 21.93 recently. Nevertheless, GE's plans to reduce its participation were well telegraphed in advance. As a result, a schedule and details of its remaining role may help some investors to feel more comfortable with the news.
Write to Teresa Rivas at [email protected]
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