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Inside Baker Hughes’ Newly Added Risk Factors

Texas-based Baker Hughes Company (BKR) is one of the world’s largest oilfield services companies. It provides customers in the oil and gas industry with the technology used in operations such as drilling and production.

For Q4 2021, Baker Hughes reported revenue of $5.5 billion, flat from the same quarter in the previous year and in line with the consensus estimate. Adjusted EPS of $0.25 fell short of the consensus estimate of $0.28 but improved from a loss per share of $0.07 in the same quarter the previous year.

Baker plans to distribute a quarterly cash dividend of $0.18 per share on February 18. The stock currently offers a dividend yield of 2.47%, compared to the sector average of 1.34%.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Baker Hughes.

Risk Factors

According to the new TipRanks Risk Factors tool, Baker Hughes’ main risk category is Legal and Regulatory, which contains 9 of the total 38 risks identified for the stock. Production and Ability to Sell are the next two major risk categories with 8 and 7 risks, respectively. Baker Hughes has recently added two new risk factors to its profile under the Finance and Corporate category.

It cautions shareholders that they are subject to restrictions on where they can sue the company over certain disputes. Baker Hughes explains that its updated certificate of incorporation designates a specific court in Delaware as the exclusive forum for settling certain lawsuits brought by shareholders against the company. It means that the ability of shareholders to obtain a judicial forum of their choice for disputes with the company may be limited. As a result, shareholders may be discouraged from bringing up lawsuits against Baker Hughes or its executives. 

In another newly added risk factor, the company discusses its relationship with General Electric (GE). Baker Hughes was part of GE for some time before it separated to become a standalone public company. But the companies have maintained some ties. For example, Baker says it has certain long-term agreements with GE. It also explains that certain intellectual property rights that are crucial to its business are derived through licensing arrangements with GE. Therefore, Baker cautions that its business operations could be adversely impacted if GE fails to comply with their agreements.

Baker Hughes’ stock has gained about 15% year-to-date.

Analysts’ Take

In January, Barclays analyst David Anderson reiterated a Buy rating on Baker Hughes stock and raised the price target to $31 from $30. Anderson’s new price target suggests 7.68% upside potential.

Consensus among analysts is a Strong Buy based on 12 Buys and 4 Holds. The average Baker Hughes price target of $71.25 implies 30.97% upside potential to current levels.

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