Baker Hughes Co (BKR) stock intrinsic value fair value estimate & owner earnings analysis

Baker Hughes sells equipment and services to the oil, gas and industrial world. Its Oilfield Services & Equipment segment (about $14.3 billion of 2025 revenue, down 8%) is tied to drilling and production activity and moves with the oil cycle. Its Industrial & Energy Technology segment (about $13.4 billion, up 10%) builds gas turbines, compressors and LNG-related equipment and then services them for years afterward. At the end of 2025 the company had $35.9 billion of signed but unfulfilled customer contracts, $32.4 billion of it in the Industrial & Energy Technology segment; the company expects to recognize about 59% of that within 2 years, 74% within 5 years and 89% within 15 years. How we measured earnings. We start with cash from operations and remove the swings from receivables, inventories, payables, customer advance payments and other operating items, because those reverse from year to year. We then subtract stock-based compensation as a real cost, and subtract the part of capital spending needed just to keep the business running (spending tied to revenue growth is treated as optional). Per-share figures use Class A shares plus, in the years when they existed, the former Class B shares held by General Electric; for 2018 through 2022 we used year-end counts, which is approximate. For 2018 and 2019 the company did not report stock compensation on its own line, so we estimated the working-capital line net of the stock compensation figure from its equity statement. Owner earnings per share were about $0.73 in 2018, $0.66 in 2019, -$0.26 in 2020 (pandemic), $0.75 in 2021, $0.45 in 2022, $1.36 in 2023, $1.93 in 2024 and $1.95 in 2025. Non-cash items such as the $702 million deferred tax benefit in 2025 (part of which came from releasing valuation allowances) are not counted as earnings. Cross-checking against net income plus depreciation and other non-cash items less maintenance capital spending matched our figure for 2023, 2024 and 2025. Base level. We use the middle value of 2021 through 2025, $1.36 per share. The earlier years belong to the period of separation from General Electric and the pandemic. The window includes both the weak 2021 and 2022 years and the strong 2024 and 2025 years, which suits a cyclical business. Owner earnings grew about 1% in 2025 ($1.95 versus $1.93 per share); the base case assumes no growth from the $1.36 level, so year one starts below the trailing rate. Recent strength is not used to raise the level, because oilfield revenue and orders fell in 2025, and the 2023 jump in cash flow was helped by $1.6 billion of customer advance payments that we strip out. Base case ($15.30 per share): $1.36 per share is earned for 15 years, matching the horizon over which 89% of signed contracts are expected to convert to revenue, followed by 10 years at half that level ($0.68) reflecting service work on equipment already installed (Gas Technology Services orders were $3,769 million in 2025, up from $3,141 million in 2024 and $3,004 million in 2023). Nothing further is credited. We give no credit for share gains, new energy products, margin improvement or growth in oilfield activity, since none is contracted. Bear case ($5.52 per share): oilfield activity slips into a downturn like 2021 and 2022, when owner earnings were $0.75 and $0.45 per share, and earnings stay near $0.75 for 10 years and then end. As of its February 2026 annual report, the company also planned to buy Chart Industries for $210 per share in cash, with closing expected in the second quarter of 2026 and a $14.9 billion bridge loan committed for financing; the cost of financing that purchase could weigh on results. This case does not assume a specific cost for the deal. Bull case ($21.93 per share): the current level of $1.95 per share is maintained for 15 years as the signed contract backlog converts on schedule, then half of it for 10 years. Growth above the current level is not credited. What was excluded. The Chart Industries purchase is not in any case because it had not closed as of that annual report and its returns are unknown. Two businesses held for sale (net assets of $864 million) are left in at their current earnings and sale proceeds are not added. Debt is not deducted separately because interest is already paid out of the cash flow we measure; the company held $3,715 million of cash and $6,087 million of debt at the end of 2025. What would make this wrong: a deeper or longer oilfield downturn than 2020 through 2022, cancellations or delays in large LNG and turbine contracts, or an acquisition that destroys value would push results toward the bear case. Faster conversion of the contract backlog at higher margins than 2025 would push toward the bull case. The margin-of-safety price is $9.00 per share, a discount of about 41% to the base case, reflecting the cyclical exposure and the size of the planned acquisition.