posteriori
Baker Hughes (NASDAQ:BKR) -1.6% in Monday’s trading as Wolfe Research downgraded the stock to Peer Perform from Outperform with a $45 price target, saying it sees the risk of a revenue deceleration in the Industrial & Energy Technology business due to a slowdown in global LNG project final investment decisions.
Baker Hughes (BKR) shares have sold off in the past week after guiding for slower order momentum in the IET segment, which “if it were just regulatory risk, we’d push to be more aggressive on the stock since policy can always change, but we see too much risk from LNG market factors,” Wolfe’s Sam Margolin wrote.
The share selloff was exacerbated by the Biden administration statement that pending U.S. LNG export approvals would be halted, but “market risk to the pace of future LNG FIDs is more significant to us than regulatory risk, and so we downgrade BKR shares even after a pullback as we see high risk of a longer than expected pause in the LNG buildout cycle due to [supply and demand] conditions, and a resultant revenue growth cliff in 2025, according to Margolin.
While the IET segment and Gas Technology subsegments are diversified, a period of LNG market oversupply and resultant slowdown in capacity buildout likely will be a valuation headwind to Baker Hughes (BKR) shares, Margolin said.
Separately, Baker Hughes (BKR) reported progress on various initiatives to support the growth of the hydrogen economy, during its annual meeting held in Florence, Italy.
The company said it launched a new hydrogen testing facility in Florence for validation of its NovaLT industrial turbines to run blends all the way up to 100% hydrogen, and recently completed manufacturing and testing of its NovaLT 16 hydrogen turbines for Air Products’ Net-Zero Hydrogen Energy Complex in Edmonton, Alberta.