On May 15, Zacks Investment Research downgraded oilfield
National Oilwell Varco Inc.
), to a Zacks Rank #5 (Strong Sell).
CAMERON INTL (CAM): Free Stock Analysis
MATRIX SERVICE (MTRX): Free Stock Analysis
NATURAL GAS SVC (NGS): Free Stock Analysis
NATL OILWELL VR (NOV): Free Stock Analysis
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Why the Downgrade?
National Oilwell has witnessed sharp downward estimate revisions
after reporting disappointing first-quarter 2013 results.
On Apr 26, 2013, National Oilwell reported first-quarter earnings
per share (excluding transaction costs) of $1.29, missing the
Zacks Consensus Estimate by 8 cents and the year-ago adjusted
earnings by 15 cents. The result was affected by lower operating
margin in all its segments.
Following the weaker-than-expected earnings announcement, the
Zacks Consensus Estimate for the second quarter of 2013 has moved
down by 12 cents (or 8.2%) to $1.34 per share over the last 30
days. For the full year also, most of the estimates (15 out of
17) were revised downward over the same timeframe, pulling down
the Zacks Consensus Estimate by 7.8% to $5.65 per share.
Moreover, with new competitors entering the market and the
narrowing of capital expenditure by the drilling contractors,
National Oilwell - which ranks ahead of
Cameron International Corp.
) as the biggest U.S. maker of oilfield equipments - has seen its
new equipment package pricing fall around 10% below the levels
achieved during the peak of 2007-2008.
In particular, National Oilwell's margins have been hit hard by
the ongoing North American drilling slump. We expect the
situation - characterized by tepid demand and weak pricing - to
normalize in late 2013.
Stocks that Warrant a Look
While we expect National Oilwell to perform below its peers and
industry levels in the coming months and see little reason for
investors to own the stock, one can look at
Matrix Service Company
Natural Gas Services Group Inc.
) as good buying opportunities. These oil field machinery and
equipment providers - carrying a Zacks Rank #2 (Buy) - have solid
secular growth stories and are expected to outperform the broader
U.S. equity market over the next 1 to 3 months.