Global large-cap energy equipment maker
National Oilwell Varco Inc.
) reported better-than-expected first quarter 2012 results on April
25 with both revenue and earnings per share improving year over
We cover below the results of the recent earnings announcement,
subsequent analyst estimate revisions and the Zacks ratings for the
short-term and long-term outlook for the stock.
First Quarter Recap
The quarter's earnings per share (excluding transaction costs)
came in at $1.44, comfortably above the Zacks Consensus Estimate of
$1.39 and the year-ago adjusted profit of $1.00.
Quarterly revenue rose 36.8% year over year - from $3,146.0
million to $4,303.0 million - but was marginally below our
projection of $4,311.0 million.
(Read our full coverage on this earnings report:
NOV profit rises on robust activity
Agreement of Analysts
Looking at the estimates' revision trend, it becomes clear that
the majority of analysts project a pessimistic outlook for National
Oilwell Varco's second quarter results.
Of the total 17 analysts covering the stock, 5 have raised their
estimates and 7 have moved in the opposite direction over the last
For fiscal 2012, 8 analysts (out of 19 covering the stock) have
upped their estimates, while 7 analysts went for downward
revisions. However, over the last 7 days, no earnings estimate
revision was witnessed.
The estimate revisions for the upcoming quarter and full-year
2012 indicate the analysts' sentiment based on the company's
superior drilling fleet, healthy financial profile and attractive
acquisitions, offset by weak oil and natural gas fundamentals and
international operational disturbances.
Magnitude of Estimate Revisions
Reflecting the influence from analysts' earnings revision, in
the last 30 days, the Zacks Consensus Estimate for the second
quarter dropped by a penny to $1.42. For the past seven days, the
estimate for the quarter remained static.
For the full year, the earnings estimate moved up to $5.97 from
$5.94, over the last 30 days. For the last one week, the estimate
With respect to earnings surprise, National Oilwell Varco showed
a positive trend in the last 4 quarters. The company recorded a
minimum surprise of 3.60% in the first quarter of 2012 to the
maximum of 12.9% in the second quarter of 2011. On average, the
earnings surprise was a positive 7.39%. Based on the current flow,
we expect the company to come up with healthy results in the
We are maintaining our Neutral recommendation on National
Oilwell Varco shares, as we see limited upside over the near
We believe that the company remains better positioned to
navigate the uncertain environment than many of its peers, given
its strong balance sheet, backlog of over $10 billion, leading
market position and technological innovation. Furthermore, National
Oilwell Varco's competitive position has received a boost from the
recent acquisitions, which will solidify its geographical footprint
as well as service and product offering and raise its earnings
However, the shares of the company are fairly valued at current
levels, considering the sensitivity of the business to gas/oil
price volatility, as well as exploration and production spending
patterns, costs, geo-political risks, competition and the advent of
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 a short-term Hold rating.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years
ago that earnings estimate revisions are the most powerful force
impacting stock prices. He turned this ground breaking discovery
into two of the most celebrating stock rating systems in use
today. The Zacks Rank for stock trading in a 1 to 3 month time
horizon and the Zacks Recommendation for long-term investing (6+
months). These "Earnings Estimate Scorecard" articles help
analyze the important aspects of estimate revisions for each
stock after their quarterly earnings announcements. Learn more
about earnings estimates and our proven stock ratings at:
CAMERON INTL (CAM): Free Stock Analysis Report
NATL OILWELL VR (NOV): Free Stock Analysis
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