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Baker Hughes Incorporated (BHI), Goldman Sachs Group Inc (GS): Which Oil Service Name to Buy Among Polarized Views From the Street?

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Baker Hughes Incorporated (NYSE:BHI)There have been a wide variety of comments coming out regarding the outlook for the oil services industry. The other day, Goldman Sachs Group Inc (NYSE:GS) produced a report that stated that investors hold a bearish point of view on this industry. Credit Suisse Group AG (ADR) (NYSE:CS) recently published a report that states that chances of oil field service companies beating the consensus estimates are more than missing them. Oil field service is just one example of an industry that has attracted diverging points of views from the Street. There are many others out there. And that is not surprising.

I haven’t made my point as yet. Contradictory points of views also contain an investing theme within them. The key is to look for those ‘common’ companies that have got a buy or sell recommendation from analysts on both sides of the table (i.e. bullish and bearish). Let’s have a look at the oil field service sector and comments from both Goldman Sachs Group Inc (NYSE:GS) and Credit Suisse Group AG (ADR) (NYSE:CS) analysts.

Credit Suisse Group AG (ADR) (NYSE:CS) likes Baker Hughes Incorporated (NYSE:BHI), Goldman Sachs Group Inc (NYSE:GS) doesn’t

Some time back, Credit Suisse Group AG (ADR) (NYSE:CS) highlighted its confidence in Baker Hughes Incorporated (NYSE:BHI) second quarter estimates, as North American (NAM) margins on the net could be better than the market currently expects, given advances in the company’s 24-hour pressure pumping, or PP, work. Baker Hughes Incorporated (NYSE:BHI)’s 24-hour PP work is now approximately 45% and could potentially hit 60% by year-end (current stated goal is 50%). The Gulf of Mexico (GoM) continues to improve, the Canadian breakup is as expected, indicating North America (NAM) net could be better than the market currently expects. Overall, Credit Suisse Group AG (ADR) (NYSE:CS) expects U.S. 24-hour work to offset Canadian seasonality.

On the other hand, Goldman Sachs Group Inc (NYSE:GS) has a neutral recommendation on Baker Hughes Incorporated (NYSE:BHI). Goldman Sachs Group Inc (NYSE:GS) believes that Baker Hughes Incorporated (NYSE:BHI) is gaining on its market share in the U.S. However, the 24-hour operation is likely to be a great strain on the organization’s supply chain, and Goldman Sachs Group Inc (NYSE:GS) would like to see a track record of strong operating performance in 24-hour jobs before it becomes more favorable on Baker Hughes Incorporated (NYSE:BHI).

Goldman likes Nabors but CS doesn’t

Seldom will you find such a polarized point of view form different players in the Street for a $5 billion company like Nabors Industries Ltd. (NYSE:NBR). Where Goldman places it on its must-buy list, Credit Suisse Group AG (ADR) (NYSE:CS) gives it an outright sell recommendation (not even a neutral one!).

Goldman believes that Nabors Industries Ltd. (NYSE:NBR) offers opportunity for margin bottoming in the second quarter following several years of margin declines. The company also offers self-help upside in its various businesses, and there is much more “low hanging fruit” that the company can act on.

On the international side, the company has seen several years of consistent income pressure, and this is expected to turn around on a secular basis in the second quarter, as it gets cost recovery in Saudi Arabia and as several of its rigs start up in Algeria and other markets. In addition, operating costs in Iraq and Yemen have also fallen.

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