Global large-cap energy equipment maker
National Oilwell Varco Inc.
) is scheduled to report its first quarter 2012 results on
Wednesday April 25, 2012 before the start of trading.
The Zacks Consensus Estimate for the to-be-reported quarter is a
profit of $1.39 per share (with an upside potential of 2.16%) on
revenues of $4,311.0 million. In the year-ago quarter, National
Oilwell Varco recorded a gain of $1.00 per share, while sales came
in at $3,146.0 million.
Fourth Quarter Recap
National Oilwell Varco's fourth-quarter 2011 results came in
strong, helped by robust activity levels across all business
segments and benefits from the Ameron acquisition.
Earnings per share (excluding transaction charges) came in at
$1.37, comfortably above the Zacks Consensus Estimate of $1.30 and
the year-ago profit of $1.05. Quarterly revenue rose 34.3% year
over year - from $3,172.0 million to $4,259.0 million - and was
6.4% above our projection.
(Read our full coverage on this earnings report:
National Oilwell Beats Overall
Points to Ponder for First Quarter
The growth in global energy demand will continue to boost
drilling activity, with the employment of technology to find and
recover oil/gas resources. As such, opportunities for oilfield
services company like National Oilwell Varco will also improve, as
it captures the economic benefit of this trend. Supported by strong
consistency in its earnings/cash flows, attractive fundamentals and
a positive outlook, we remain optimistic about the firm's near-term
The company - one of the largest manufacturers of drilling
equipment in the world - has a large installed base of rigs
worldwide that provides for a steady recurring revenue stream
through demand for maintenance, parts and other expendable
However, we remain worried by natural gas' weak fundamentals.
The glut in domestic gas supplies still exists, with storage levels
remaining significantly above their five-year average.
This will continue to weigh on natural gas prices in the
near-to-medium term that may ultimately make shale drilling
(drilling for natural gas trapped within dense sedimentary rock
formations, or shale formations) too expensive to continue. As a
result, demand for the sophisticated rig technologies (like those
supplied by National Oilwell Varco) may wane, adversely affecting
the company's operating results.
Agreement of Analysts
As a result of the above-mentioned factors, there has been mixed
reactions from the analysts regarding National Oilwell Varco's
outlook. In particular, we see a notable number of estimate
revisions over the past 30 days.
Out of the 19 analysts covering the stock, 2 have revised their
estimates downward for the first quarter of 2012, with the same
number going in the opposite direction.
Magnitude of Estimate Revisions
As a result of analysts revising estimates both ways over the
past 30 days, the Zacks Consensus Estimate for the quarter has
remained static at $1.39 per share.
The company has a history of positive earnings surprises,
surpassing the Zacks Consensus Estimate in three of the last 4
quarters. National Oilwell Varco has performed consistently during
this period with its average earnings surprise being 6.24%. This
implies that the company has beaten the Zacks Consensus Estimate by
6.24% over the last four quarters.
As such, we will not be surprised if National Oilwell Varco
reports better-than-expected results yet again, as it is one of the
least affected companies from the natural gas drilling slowdown.
This is because the Houston, Texas-based firm is not as exposed to
domestic onshore natural gas drilling as some of its peers are.
Rating & Recommendation
National Oilwell Varco, which ranks ahead of
Cameron International Corp.
) as the biggest U.S. maker of oilfield equipment, is currently a
Zacks #3 Rank (Hold) stock, implying that it is expected to perform
in line with the broader U.S. equity market over the next one to
three months. We are also maintaining our long-term Neutral
recommendation on the stock.
CAMERON INTL (
): Free Stock Analysis Report
NATL OILWELL VR (
): Free Stock Analysis Report
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