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On Tuesday, UBS maintained a Neutral rating on Baker Hughes (NASDAQ:BKR) with a steady price target of $40.00. The commentary from UBS followed Baker Hughes’ announcement of the sale of its PSI product line to Crane Company (NYSE:CR) for $1.15 billion. According to InvestingPro data, Baker Hughes, with a market capitalization of $37.55 billion, maintains strong financial health with a perfect Piotroski Score of 9, indicating robust operational efficiency. The deal is valued at approximately 19 times the forecasted FY25 Enterprise Value to EBITDA (EV/EBITDA) ratio.
The transaction is seen as a strategic move for Baker Hughes, fetching a price that is significantly higher than the company’s current EV/EBITDA multiple. The product line in question is projected to achieve an EBITDA margin of 15.4% for the current year. The sale is expected to aid Baker Hughes in improving its profit margins, aligning with its objective of reaching a 20% EBITDA margin. The company currently maintains a gross profit margin of 21.36% and generates annual revenue of $27.84 billion.
The divested PSI product line, which deals in pressure pumping systems, has been acquired by Crane Company, a diversified manufacturer of engineered industrial products. The sale is part of Baker Hughes’ ongoing efforts to streamline its operations and focus on more profitable segments.
The UBS analyst views the divestiture favorably, suggesting that the premium valuation of the sale could have a positive impact on Baker Hughes’ financials. The deal is anticipated to contribute to margin expansion for the oilfield services company as it progresses toward its margin target.
The confirmation of the $40.00 price target by UBS indicates the firm’s unchanged outlook on Baker Hughes’ stock following the announcement of the sale. As the transaction is completed, investors and industry observers will be watching to see how this divestment influences Baker Hughes’ operational efficiency and financial performance moving forward.
In other recent news, Crane Company has announced plans to acquire Precision Sensors & Instrumentation (PSI) for $1.06 billion, including tax benefits. This acquisition aims to enhance Crane’s Aerospace & Electronics and Process Flow Technologies segments. PSI’s projected sales for 2025 are approximately $390 million, with an adjusted EBITDA of $60 million. The transaction is expected to close by the end of 2025 or early 2026, pending regulatory approvals.
Separately, Cactus (NYSE:WHD) Companies is set to acquire a 65% controlling interest in Baker Hughes’ Surface Pressure Control business for $344.5 million. The deal, valued at $530 million on a cash-free, debt-free basis, will leave Baker Hughes with a 35% stake. This transaction is anticipated to finalize in the second half of 2025.
Additionally, RBC Capital Markets has lowered its price target for Baker Hughes stock to $46, down from $50, while maintaining an Outperform rating. This adjustment follows Baker Hughes’ first-quarter earnings for 2025, which slightly exceeded expectations. Despite challenges from tariffs and commodity prices, RBC Capital sees potential value in Baker Hughes’ stock for long-term investors.
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