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Trade Ideas

Global Trade Idea: Baker Hughes Company (BKR US) - BUY

 

By Peet Serfontein & Motheo Tlhagale

Baker Hughes is a multinational energy technology company that operates in the oil and gas industry. The company offers a wide range of services, including reservoir evaluation, drilling services, formation evaluation, well construction, artificial lift systems, and digital solutions for oilfield operations. It also provides equipment and technology for refining, liquefied natural gas (LNG), and petrochemical processes in the downstream sector.

The company is headquartered in Houston, Texas, and has a global footprint that spans over 120 countries.

Technically, the price is showing a constructive pattern as it continues to merge within the boundaries of a rising wedge, marked by prolonged support and resistance (see the black converging trendlines as well as the insert). This converging price structure indicates a period of consolidation within an overall uptrend, where the stock is respecting higher lows and encountering gradually higher resistance levels.

The stock is in the accumulation phase of the Wyckoff Price Cycle - typically representing a period where informed investors or institutions quietly build positions following a downtrend or correction.

Additionally, the stock is approaching its 200-day simple moving average (SMA), signalling a bullish price trend.

Upside price momentum according to the Moving Average Convergence Divergence (MACD) indicator as well as the recent sideways trajectory of the On-balance volume (OBV) indicator, provides further support to our bullish view.

Share Information
Share Code BKR
Industry Energy
Market Capital (USD) 39.74 billion
One Year Total Return 22.75%
Return Year-to-Date -1.12%
Current Price (USD) 40.11
52 Week High (USD) 49.40
52 Week Low (USD) 32.25
Financial Year End December
The share price is down slightly year-to-date. With a beta of 0.89 we expect lower volatility compared to the market.

Consensus Expectations (Bloomberg)
FY24 FY25E FY26E FY27E
Headline Earnings per Share (USD) 2.35 2.36 2.67 2.94
Growth (%) 0.47 12.92 10.20
Dividend Per Share (USD) 0.84 0.92 0.96 1.01
Growth (%) 9.29 4.79 5.09
Forward PE (times) 16.99 15.05 13.65
Forward Dividend Yield (%) 2.29 2.40 2.52
Growth expectations are decent over the medium term, with demand being bolstered by positive secular trends.

Buy/Sell Rationale:

Technical Analysis:

    • The MACD chart shows a significant bullish crossover on 24 June, where the MACD line crossed above the signal line near the zero line, a classic indication of strengthening upward momentum. This move suggests growing buying pressure and potential for continued price gains.
    • Although momentum has slightly eased since, the crossover remains a key technical signal that buyers may be regaining control, especially if supported by volume and favourable market conditions.
    • Our entry range is between $39 and $41, or as close as possible to the current reference price of $40.11. A drop below this level would indicate a structural change in the trend, providing reason to negate the idea.
    • Our target price is $45, ~12.2% above current levels.
    • Forward calculations of the RSI suggest that the stock will be in overbought territory at $50, making our profit target realistic.
    • The proposed time to exit is mid-September 2025, though investors can adjust for either a longer or shorter horizon, depending on price behaviour.
    • A drop below $38 (~5.3% downside from current levels) would be a major concern, and as such is recommended as a stop-loss.

Fundamental view

    • Baker Hughes has two operational segments: the Oil Services & Equipment (OFSE) segment which accounts for ~56% of revenue, and the Industrial & Energy Technology (IET) segment, which makes up the balance. The company's diverse portfolio features long cycle and short cycle businesses, positioning it well to navigate periods of variability that inevitably occur across the energy sector.
    • North America accounts for ~27% of revenue, while International markets contribute ~73% of revenue.
    • For FY25, management has targeted another year of solid EBITDA growth and further margin enhancement. The company intends to leverage its broad technology portfolio and global presence to capitalise on favourable trends in natural gas and LNG, while accelerating the deployment of decarbonisation technologies. Strategic investments will continue in hydrogen, CCUS, and clean power, as policy support and technology advances improve project economics.
    • The company delivered a resilient first-quarter performance, maintaining overall revenue levels despite a challenging environment for its OFSE business. Adjusted EBITDA rose 10% y/y and adjusted EPS increased 19% y/y, while free cash flow declined 10% to $454 million.
    • Strategic developments included key gas turbine and compressor technology agreements for LNG projects, a material contract with ExxonMobil Guyana for offshore chemicals and services, and the expansion of digital production solutions in Azerbaijan and Sub-Saharan Africa.
    • In terms of downside risks, the group is exposed to fluctuating commodities and energy markets. Cost inflation and higher R&D spend requires close management as the company balances innovative growth with efficient cost controls. Lastly, the company's operations outside of North America carry some geopolitical risks and a concentrated consumer base.

Share Name and Position SW - Take profit
(Close the position)
CMG - Buy
(Continue to hold)
ETN - Buy
(Continue to hold)
Entry 39.56 54.65 334.86
Current Price 47.12 55.45 356.98
Movement +19.1% +1.5% +6.6%
Comment We closed the position early to lock in gains. The early formation of Wave 5 remains of interest. Testing its 200-day simple moving average. Upside momentum supports the trade idea. Our profit target is $64.00 with a trailing stop-loss at $52.00. A wave b formation of the Elliott Wave theory remains of interest. The price is just below the 200-day simple moving average. Upside momentum has halted, which is a concern. Our profit target is $395.00 with a trailing stop-loss at $333.00.
Time to exit 20 August 2025 17 October 2025 28 April 2026

Share Name and Position MET - Buy
(Continue to hold)
ABBV - Buy
(Continue to hold)
MSI - Buy
(Continue to hold)
Entry 79.32 185.72 422.93
Current Price 79.66 189.77 417.36
Movement +0.4% +2.2% -1.3%
Comment A rising wedge pattern remains of interest. The price is below the 200-day simple moving average, with the trade is viewed as counter-trend. Upside momentum has halted, which is a concern. Our profit target is $89.00 with a trailing stop-loss at $74.00. An upward sloping channel pattern remains of interest. Testing the 200-day simple moving average, with fading downside momentum supporting the counter-trend idea. Our profit target is $216.00 with a trailing stop-loss at $174.00. The start of Wave five of the Elliott Wave theory remains of interest. Remains below its 200-day simple moving average, with muted upside momentum supporting the counter-trend idea. Our profit target is $476.00 with a trailing stop-loss at $402.00.
Time to exit 29 August 2025 20 August 2025 13 August 2025

FNB Stockbroking and Portfolio Management (Pty) Ltd, a subsidiary of FirstRand Bank Limited, an authorised Financial Services Provider and authorised user of the JSE limited (Reg no: 1996/011732/07). This Publication note is issued by FNB Stockbroking and Portfolio Management (Pty) Ltd for the information of clients only and should not be produced in whole or part without prior permission. Although FNB Stockbroking and Portfolio Management (Pty) Ltd is an Authorised Financial Services Provider, any opinions and/or analysis contained in this Publication are for informational purposes only and should not be considered advice, including but not limited to financial, legal or tax advice, or a recommendation to invest in any security or to adopt any investment strategy. The information contained herein has been obtained from sources/persons which we believe to be reliable but is not guaranteed for correctness, completeness or otherwise and we do not assume liability for loss arising from errors in the information or that may be suffered from using or relying on the information contained herein irrespective of whether there has been any negligence by us, our affiliates or any other employees of us, and whether such losses be direct or consequential. As market and economic conditions are subject to rapid change, any comments, opinions, and analysis is rendered as of the date of publishing and may change without notice. Such changes may have a material impact on the outcome of any investment. Securities involve a degree of risk and are volatile instruments. Past performance is not indicative of future performances. Securities or financial instruments mentioned in the Publication note may not be suitable for all investors and FNB Stockbroking and Portfolio Management (Pty) Ltd has bares no responsibility whatsoever arising from or as a consequence hereof. The material is not intended as a complete analysis of every material fact regarding any share, instrument, sector, region, market, country, investment, or strategy. The recipient of this Publication must make their own investment decision and is advised to contact his relationship manager for a personal financial analysis prior to making any investment decisions. Copyright 2018 by FNB Stockbroking and Portfolio Management (Pty) Ltd.

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