Critical Analysis: Baker Hughes (NASDAQ:BKR) versus Borr Drilling (NYSE:BORR)

Baker Hughes (NASDAQ:BKR) and Borr Drilling (NYSE:BORR) are both energy companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, institutional ownership, profitability, valuation, analyst recommendations, risk and earnings.

Valuation and Earnings

This table compares Baker Hughes and Borr Drilling”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Baker Hughes	$27.73 billion	2.02	$2.59 billion	$3.10	18.17
Borr Drilling	$1.02 billion	1.31	$45.00 million	($0.78)	-5.43

Baker Hughes has higher revenue and earnings than Borr Drilling. Borr Drilling is trading at a lower price-to-earnings ratio than Baker Hughes, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

92.1% of Baker Hughes shares are owned by institutional investors. Comparatively, 83.1% of Borr Drilling shares are owned by institutional investors. 0.2% of Baker Hughes shares are owned by insiders. Comparatively, 7.9% of Borr Drilling shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Baker Hughes and Borr Drilling’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Baker Hughes	11.17%	13.85%	5.80%
Borr Drilling	-23.98%	-5.95%	-1.84%

Analyst Recommendations

This is a summary of recent recommendations and price targets for Baker Hughes and Borr Drilling, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Baker Hughes	0	4	17	0	2.81
Borr Drilling	1	2	0	2	2.60

Baker Hughes presently has a consensus price target of $71.81, indicating a potential upside of 27.50%. Borr Drilling has a consensus price target of $5.27, indicating a potential upside of 24.39%. Given Baker Hughes’ stronger consensus rating and higher probable upside, equities analysts plainly believe Baker Hughes is more favorable than Borr Drilling.

Volatility and Risk

Baker Hughes has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500. Comparatively, Borr Drilling has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500.

Summary

Baker Hughes beats Borr Drilling on 12 of the 15 factors compared between the two stocks.

About Baker Hughes

Baker Hughes Company provides a portfolio of technologies and services to energy and industrial value chain worldwide. The company operates through Oilfield Services & Equipment (OFSE) and Industrial & Energy Technology (IET) segments. The OFSE segment designs and manufactures products and provides related services, including exploration, appraisal, development, production, rejuvenation, and decommissioning for onshore and offshore oilfield operations. This segment also provides drilling services, drill bits, and drilling and completions fluids; completions, intervention, measurements, pressure pumping, and wireline services; artificial lift systems, and oilfield and industrial chemicals; subsea projects and services, flexible pipe systems, and surface pressure control systems; and integrated well services and solutions. It serves oil and natural gas companies; the United States and international independent oil and natural gas companies; national or state-owned oil companies; engineering, procurement, and construction contractors; geothermal companies; and other oilfield service companies. The IET segment provides gas technology equipment, including drivers, driven equipment, flow control, and turnkey solutions for the mechanical-drive, compression, and power-generation applications; and energy sectors, such as oil and gas, LNG operations, petrochemical, and carbon solutions. This segment also provides rack-based vibration monitoring equipment and sensors; integrated asset performance management products; inspection services; pumps, valves, and gears; precision sensors and instrumentation, and condition monitoring solutions. It serves upstream, midstream, downstream, onshore, offshore, and small and large scale customers. The company was formerly known as Baker Hughes, a GE company and changed its name to Baker Hughes Company in October 2019. Baker Hughes Company was incorporated in 2016 and is based in Houston, Texas.

About Borr Drilling

Borr Drilling Limited operates as an offshore shallow-water drilling contractor to the oil and gas industry worldwide. The company owns, contracts, and operates jack-up drilling rigs for operations in shallow-water areas, including the provision of related equipment and work crews to conduct oil and gas drilling and workover operations for exploration and production. It serves oil and gas exploration and production companies, such as integrated oil companies, state-owned national oil companies, and independent oil and gas companies. The company was formerly known as Magni Drilling Limited and changed its name to Borr Drilling Limited in December 2016. Borr Drilling Limited was incorporated in 2016 and is based in Hamilton, Bermuda.