We recently published a list of 12 Best Oil Refinery Stocks To Invest In According to Analysts. In this article, we are going to take a look at where Baker Hughes Company (NASDAQ:BKR) stands against other best oil refinery stocks to invest in according to analysts.

The United States of America is the Largest Oil Producing Country in the World with current production reaching record levels, so it doesn’t come as a surprise that it is also counted among the Countries with the Largest Refining Capacities. The US had 132 oil refineries with a total capacity of 18.4 million barrels per day (bpd) at the start of 2024, a 2% increase compared with the start of 2023.

READ ALSO: 11 Best Natural Gas Stocks to Buy Now

2024 was a difficult year for the global refining sector as industry players faced a drop in profitability to multi-year lows amid soft consumer and industrial demand (especially in China), slowing economic growth, increasing energy transition, and expanding global refining capacity. The declining fuel margins in the Q4 2024 led to disappointing earnings results for many oil refiners, as a flood of new output competed with stagnating demand. This has led to several oil majors shutting down operations and putting their refineries up for sale, but that is also not going as smoothly as expected.

Things don’t seem to be getting any better either as according to the International Energy Agency’s recent market outlook, growth in the global demand for oil is expected to slow down in the coming years as energy transitions advance, putting downward pressure on prices. The US Energy Information Administration stated last month that it expects Brent crude oil prices to fall 8% to average $74 a barrel in 2025, then fall further to $66 a barrel in 2026, further reducing margins for refiners.

Moreover, despite his repeated calls to ramp up oil production in the country, President Donald Trump’s tariffs on imports from Mexico and Canada could make things worse for the refining sector. Many refineries in the Midwest depend on Canadian crude and the upcoming 10% tariff will force them to pay either more for their feedstock, or slash production, further squeezing an industry already in decline. The President wants to make America self-sufficient and independent when it comes to energy, but no matter how much oil the United States pumps, its refineries were designed to process the darker, denser, cheaper crude that is hard to find domestically. However, Trump’s plans to roll back support for electric vehicles and charging stations could slow their sales and bolster gasoline demand, offering some respite to the industry.

The rapid energy transition is also a major cause of concern for the refining sector as governments push drivers toward electric vehicles in pursuit of climate goals. So the only way forward is for the industry to adapt and evolve. Several forward-looking refiners are now boosting their resilience by upgrading their facilities to produce higher-value but lower-carbon products such as petrochemicals and renewable fuels, though it will require significant capital investment.

The energy sector has witnessed considerable fluctuations over the last few months, surging by over 6% in November before declining around 10% in December. However, the broader energy sector ended last year with a return of just 5.72%, significantly lagging behind gains of 25% by the wider market. Nevertheless, the sector’s performance over the past 3-year and 5-year periods remains strong.

Methodology

To collect data for this article, we examined all the companies in the oil refining sector that are listed on NASDAQ and NYSE and then compiled a list of the stocks with the highest upside potential according to Wall Street analysts, as of February 18, 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Baker Hughes Company (NASDAQ:BKR)

Stock Upside Potential: 13.84%

Baker Hughes Company (NASDAQ:BKR) is an energy technology company that provides solutions for energy and industrial customers worldwide. The company is also involved in the oil refining business through an integrated suite of high-performance equipment, chemicals, real-time data technology, and services.

Baker Hughes Company (NASDAQ:BKR) showed a strong performance in Q4 2024 as its adjusted EPS remained on an impressive growth trajectory, increasing 37% from Q4 of 2023 and up 47% for the full year. The company’s revenue also rose by 7.7% to $7.364 billion, beating the consensus estimate by over $293 million. Moreover, BKR ended 2024 with total orders of $28.2 billion, including $13 billion of IET orders that marked the second-highest order total for the segment.

Baker Hughes Company (NASDAQ:BKR) maintains a strong balance sheet and generated a strong free cash flow of $894 million during Q4 2024, resulting in a record annual free cash flow of $2.3 billion. The company remains committed to returning 60% to 80% of free cash flow to shareholders and distributed $1.3 billion in dividends and share repurchases last year, amounting to approximately 60% of its cash flow. BKR increased its quarterly dividend by 10% to $0.23 per share last month, marking the fourth consecutive year that it has raised its dividend, increasing by 28% since Q3 of 2022.

Shares of Baker Hughes Company (NASDAQ:BKR) have surged by over 61% over the last year, putting it among the 12 Hot Oil Stocks to Buy According to Hedge Funds.

Overall, BKR ranks 6th on our list of best oil refinery stocks to invest in according to analysts. While we acknowledge the potential for BKR to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BKR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.