Global large-cap energy equipment maker,
National Oilwell Varco
) reported better-than-expected fourth-quarter earnings, aided by
robust activity levels as well as good project execution skills.
Every segment of the company managed to improve revenues and
operating profit over the year-ago period.
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Earnings per share (excluding transaction costs) came in at
$1.49, exceeding the Zacks Consensus Estimate by a nickel and
comfortably beating the year-ago adjusted profit by 9.0%.
Quarterly revenue jumped 33.5% year over year from $4,259.0
million to $5,685.0 million and also managed to beat our
projection of $5,298.0 million.
For its fiscal year ended Dec 31, 2012, National Oilwell reported
per share adjusted profits of $5.91, above the Zacks Consensus
Estimate of $5.86 and 24.0% higher than year-ago adjusted profit.
Revenues of $20.0 billion were 36.7% above the prior-year figure
and Zacks Consensus Estimate of $19.7 billion.
: Revenue in the Rig Technology segment surged 25.0% year over
year to $2,896.0 million, while revenue out of backlog was up 25%
from the corresponding period last year.
The segment's operating profit was up 7.5% year over year to
$648.0 million. Rig Technology's profitability during the quarter
was helped by higher demand for capital equipment used for
newbuild offshore rigs. However, operating margin was recorded at
22.4%, dipping from 26.0% in the year-ago period.
Petroleum Services & Supplies
: The company's Petroleum Services & Supplies segment
achieved revenues of $1,770.0 million, up 12.7% from the year-ago
period, while operating profit climbed 17.9% from the fourth
quarter of 2011 to $355.0 million.
Operating margin stood at 20.1% versus 19.2% in the year-ago
quarter. The positive comparisons were due to higher demand for
products and services provided by the segment, buoyed by improved
Distribution & Transmission
: Distribution & Transmission revenues climbed 126.4% year
over year to $1,268.0 million. Operating profit was $78 million,
compared with $45 million in the year-earlier quarter. However,
operating margin came in at 6.2%, down from 8.0% in the year-ago.
Backlog for capital equipment orders for the company's Rig
Technology segment was $11,860.0 million at Dec 31, 2012, up 2%
from the previous quarter level.
At the end of the fourth quarter, the company's cash on hand
stood at $3,319.0 million and debt reached $3,149.0 million. The
debt-to-capitalization ratio came in at approximately 13.4%.
The company currently retains a Zacks Rank #3 (Hold), implying
that it is expected to perform in line with the broader U.S.
equity market over the next one to three months.
National Oilwell Varco is one of the biggest manufacturers of
drilling equipment in the world with an impressive business
model. The company's large installed base of rigs worldwide
provides a steady recurring revenue stream through demand for
maintenance, parts and other expendable products.
Additionally, the growing search for oil into new deepwater
frontiers has significantly increased the demand for rigs capable
of tackling the immense challenges of drilling in a mile or more
of water. National Oilwell Varco is well positioned to supply
such technologically-advanced production equipment.
However, National Oilwell Varco relies on its ability to develop
and acquire essential products and technologies that drive its
operational performance and growth. If the company's technologies
and/or products become obsolete, or if it fails to bring these to
market in a timely and competitive manner, it may face severe
operational and financial dilemmas.
Meanwhile, there are certain other oilfield service companies in
the energy sector that are expected to perform well in the coming
one to three months. These include
Compressco Partners, L.P.
) with a Zacks Rank #1 (Strong Buy) and
Hornbeck Offshore Services Inc.
) - both with Zacks Rank #2 (Buy).