Better Buy: Baker Hughes vs. Core Laboratories N.V.

Capital spending is the lifeblood of energy services companies. With oil trading at historically low levels, exploration and production (E&P) companies have pulled back hard on spending plans. That's left services companies like Baker Hughes (NYSE: BKR) and Core Laboratories (NYSE: CLB) reeling as revenues dry up. Investors have been fleeing, leading to deep price declines. Is this an opportunity for long-term investors in either company?

If there is one thing that is consistent in the energy sector it is that the commodity-driven business is highly cyclical. Supply and demand routinely get out of whack, with prices rising and falling in often large and swift moves.

Today, oil is down and out. There are normal patterns that occur when this happens, the most notable of which, for services companies like Baker Hughes and Core Labs, is that E&P companies pull back on their capital spending plans. That basically means less revenue for services companies. So it's not surprising that Baker Hughes stock is down roughly 40% so far this year, with Core Labs off by nearly 50%.     

Continue reading

Source Fool.com