UBS Securities upgraded its rating on shares of Baker Hughes Inc. (NYSE: BHI) to buy from neutral and increased its price target to $87 from $73. The stock touched a new 52-week high of $72.40 during Thursday's early trade.

We are upgrading Baker Hughes given: our increasing comfort that Baker Hughes can ultimately reach international margins which are more in-line with the peer group; growing traction in the international markets, incl Asia Pacific; the successful absorption of BJS into the NAM region and our expectation of increased penetration in the international markets; further upside potential to both 2012 and 2013 EPS estimates with successful international margin expansion, said Angie Sedita, an analyst at UBS Securities.

Sedita said she has viewed Baker Hughes as an evolving story with a lot on its plate (reorganization, BJS acquisition, etc). As a result execution has been somewhat inconsistent and drove her neutral rating.

However, Sedita is increasingly comfortable that the company can realize higher international margins driven by cost cutting, operating efficiencies, and activity led gains. Importantly, Sedita is encouraged by the clear ownership by the regional heads of specific margin goals and regional scorecards.

The brokerage increased its 2011 EPS estimate for Baker Hughes to $3.77 from $3.63 and its 2012 estimate to $4.95 from $4.52. Sedita raised 2012 estimate by another 10 percent, after raising 12 percent in January, to $4.95 assuming a 15 percent international margin by year-end and near competitor margins by late 2012.

Baker Hughes has already begun to gain momentum versus its peer group. However as the company begins to consistently execute and gain traction both in margins and international revenue growth we expect continued relative outperformance. We raise our price target to $87 based on our increased EPS estimate and a 2012 price-to-earnings multiple of 17.6 times, said Sedita.

Baker Hughes stock is trading up 0.17 percent at $71.35 on a volume of 1.44 million shares on the NYSE at 10:54 am EDT. The stock traded between $35.62 and $72.40.

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