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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (47216)	3/28/2012 2:21:13 AM
From: Paul Senior	1 Recommendation Read Replies (1) \| Respond to of 78751

BHI: "Credit Suisse (available via Etrade) has a pretty good report on BHI dated 3/23 out. In this report, they revised the earnings for 2012 down to 3.5$/share. This could easily get is to the mid thirties in terms of share price." And in the report, they have an "outperform" rating on BHI with a target price of $56 (lowered from $62). With the stock now at $42 I'll continue to bet on something like a 14 point upside from here vs. a 7-8 point downside.

To: Spekulatius who wrote (47216)	3/28/2012 3:24:25 PM
From: Brasco One	Respond to of 78751

UBS Key Call: Baker Hughes Inc. Another cut to our 2012E EPS ?? After another round of conversations w/ BHI we are further trimming EPS We are lowering our 2012 EPS estimate to $3.46 from $3.72, following a more lengthy conversation with Baker Hughes. Our 2013 estimate is unchanged at $4.48. ?? Further updates to our forecasts stem from: 1) We further lowered our Q2-12 NAM margin to 10% from 12.8%, reflecting both the Canadian seasonal decline, price weakness in frac across the US basins, and continued logistics issues. 2) Q3-11 we are forecasting margins of only 12% under our assumption frac pricing pressure accelerates and the logistical issues for BHI are not fully rectified. 3) BHI has at least 350 basis pts of self help on the logistic issues; however we do not expect it to be recovered until late-2012. ?? Other key points: 1) We believe the issues w/ BHI are 50% specific to BHI and 50% overall industry conditions. 2) Any reduction by BHI in new frac capacity would only impact Q4- 12. 3) However, the company will continue to add frac in 2013 given the long-term attractiveness of shale. We believe the other large companies will also continue to add capacity in 2013. This will keep margins under pressure. 4) We believe the frac markets are balanced today. 5) Pricing in oil basins is beginning to become under pressure and will grow, in our view (Permian, Bakken, etc). ?? Valuation – Trading at 34% discount on new EPS to 10 yr average As we have been saying for some time, industry conditions will worsen before they improve. Current valuation reflects weakening fundamentals. However, we believe the pressure pumping capacity issue will continue to overhang the oil service diversifieds over the next several quarters. Our $60 price target is based on ~13x 2013 P/E target multiple.