Two oil sector stocks that JPMorgan believes can overcome market challenges

The oil industry is facing new challenges. With declining spending and lower investment intensity in North America, analysts believe the oil services sector is at risk of further decline. Still, JPMorgan analyst Arun Jayaram has identified two stocks that have the potential to significantly outperform the market.

These are Baker Hughes Company $BKR and National Energy Services Reunited $NESR. These companies are well positioned to face macroeconomic challenges due to their unique strategies, diversification and focus on innovation.

Baker Hughes Company $BKR

Baker Hughes is one of the global leaders in oilfield services. The company uses advanced technologies to improve production and efficiency in the oil and gas industry. One of its key areas is liquefied natural gas (LNG), where it has more than 30 years of experience. Baker Hughes is also investing in digitalisation and the use of artificial intelligence, for example through its BHC3 AI platform, which enables predictive solutions and improves efficiency.

In 2023, the company recorded 199 'perfect HSE days', meaning there were no employee injuries during these days - a significant achievement in a hazardous industry. In the third quarter of 2024, Baker Hughes achieved revenue of $6.9 billion, a 4% year-over-year increase. Analyst Arun Jayaram expects BKR to benefit from long-term growth trends in LNG, natural gas infrastructure and new energy, allowing it to weather adverse sector conditions. With a target price of $50 per share, Jayaram forecasts 20% growth over the next year.

National Energy Services Reunited $NESR

National Energy Services Reunited is a relatively young company that focuses on oilfield services in the Middle East, North Africa, India and Indonesia regions. With more than 6,000 employees and a diverse range of services, including hydraulic fracturing, drilling and well servicing services, NESR provides critical technologies to upstream companies.

NESR reported revenues of $336.2 million in the third quarter of 2024, a 12% year-over-year increase. Analyst Jayaram points out that NESR offers investors a unique opportunity to benefit from the development of oilfield services in the MENA/APAC regions, where it can better compete with traditional players due to its geographic specialization and attractive valuation.

With a target price of $13 per share, Jayaram estimates that NESR can achieve growth of up to 40% over the next 12 months.

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Source: Yahoo Finance