Earnings impact
The Fervo Energy contract adds a new, high‑margin revenue stream for Baker Hughes (BKR) in the fast‑growing geothermal segment. The five‑plant ORC package is sized to deliver about 300 MW of clean power – roughly the equivalent of 180 k homes – and the engineering‑to‑delivery scope typically translates into contract values of $50‑$80 million per plant for a total of $250‑$400 million in billings. Because Baker Hughes recognizes revenue on a percentage‑of‑completion basis for large equipment contracts, roughly one‑third to one‑half of the total billings will be booked as revenue in the current and next fiscal quarters, depending on construction milestones at the Utah site. At Baker Hughes’ historical gross margin of ~30 % on equipment and services, the deal could contribute $75‑$120 million of gross profit and lift adjusted EPS by roughly 5‑8 cents in FY 2025 – a modest but meaningful upside in a year where core oil‑field earnings are expected to be flat‑to‑slightly down amid a softer upstream market.
Trading implications
The contract is a positive catalyst that broadens Baker Hughes’ renewable‑energy exposure and underpins its “energy‑transition” narrative, which analysts are already crediting with a ~3‑5 % earnings‑growth premium over peers. The market has already priced in a +75 sentiment score, and the stock is trading a few percent above its 200‑day moving average, with support near $38 and resistance around $42. A break above $42 on volume could trigger a short‑term rally as investors re‑price the incremental geothermal earnings; conversely, a pullback to $38 would present a buying opportunity for the upside‑biased case, especially if the company provides a mid‑year earnings update confirming the timing of the first ORC plant deliveries. Risks include construction delays, capital‑intensity of the project, and the broader oil‑field cycle, so risk‑adjusted positioning should be sizable but modest (10‑15 % of a core energy‑sector allocation) with a focus on the upside of the earnings uplift and the longer‑term diversification benefit.