The energy sector has been one of the best performers in the first half of 2023, as the global economy recovers from the pandemic and demand for oil and gas rebounds. However, not all energy stocks are created equal, and some have more upside potential than others. Goldman Sachs analysts have identified two energy stocks that offer “idiosyncratic opportunities” for investors, based on their unique strengths and growth drivers. These stocks are Weatherford International (WFRD) and Baker Hughes (BKR).
Weatherford: A Leader in Oilfield Services
Weatherford International is a leading provider of oilfield services, offering a range of solutions for exploration, production, and completion of wells. The company operates in 75 countries across six continents, and has a strong presence in key markets such as the Middle East, Latin America, and North America.
Weatherford has been undergoing a transformation in recent years, focusing on improving its operational efficiency, reducing its debt, and expanding its digital capabilities. The company has also been investing in innovative technologies, such as its single-trip offshore completion system, which allows both upper and lower installations to be completed in one venture, saving time and money for its customers. Additionally, Weatherford has been leveraging its RFID-enabled technology, which improves the accuracy and reliability of its installations.
Goldman Sachs analysts are bullish on Weatherford’s prospects, citing its “strong execution track record, differentiated technology portfolio, and exposure to attractive end markets.” The analysts have a buy rating on the stock, with a price target of $110, implying a 26.8% upside from its current level of $86.77.
Baker Hughes: A Diversified Energy Technology Company
Baker Hughes is another leading provider of oilfield services, but with a more diversified portfolio that includes equipment and solutions for renewable energy, industrial applications, and digital transformation. The company operates in over 120 countries, and serves customers across the entire energy value chain.
Baker Hughes has been adapting to the changing energy landscape, by increasing its exposure to low-carbon and clean energy segments, such as hydrogen, carbon capture, and offshore wind. The company has also been enhancing its digital offerings, such as its BHC3 artificial intelligence platform, which helps customers optimize their operations and reduce emissions. Furthermore, Baker Hughes has been improving its profitability and cash flow generation, by streamlining its cost structure and optimizing its capital allocation.
Goldman Sachs analysts are optimistic about Baker Hughes’ growth potential, highlighting its “diverse end market exposure, strong technology differentiation, and attractive valuation.” The analysts have a buy rating on the stock, with a price target of $45, implying a 27.4% upside from its current level of $35.33.
Conclusion
The energy sector is poised to benefit from the recovery in oil and gas demand, as well as the transition to cleaner and more efficient energy sources. However, investors need to be selective when choosing energy stocks, as some have more competitive advantages and growth opportunities than others. Goldman Sachs analysts have singled out two energy stocks that offer “idiosyncratic upside” based on their unique strengths and growth drivers: Weatherford International and Baker Hughes. These stocks are rated as strong buys by the Street’s analysts as well.
