NOV Beats Profit Est, Grows Y-Y - Analyst Blog


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Global large-cap energy equipment maker National Oilwell Varco Inc. ( NOV ) reported better-than-expected third quarter earnings, helped by robust activity levels, as well as good project execution skills. All the company's segments managed to improve their revenues and operating profit over the year-ago period.

Earnings per share (excluding transaction costs) came in at $1.52, a penny above the Zacks Consensus Estimate and comfortably beating the year-ago adjusted profit of $1.26. Quarterly revenue jumped 42.2% year over year - from $3,740.0 million to $5,319.0 million - but was marginally below our projection of $5,359.0 million.

Segmental Performance

Rig Technology: Revenue in the Rig Technology segment increased 29.3% year over year to a record $2,547.0 million, while revenue out of backlog was up 36% from the corresponding period last year.

The segment's operating profit was up 15.5% year over year to $610.0 million. Rig Technology's profitability during the quarter was helped by higher demand for capital equipment used for newbuild offshore rigs. Operating margin, at 23.9%, however, dipped from 26.8% in the year-ago period.

Petroleum Services & Supplies: The company's Petroleum Services & Supplies segment achieved revenues of $1,717.0 million, up 17.6% from the year-ago period, while operating profit rose 28.1% from the third quarter of 2011 to $383 million.

Operating margin was 22.3% versus 20.5% in the year-ago quarter. The positive comparisons were due to higher demand for products and services provided by the segment, buoyed by improved oilfield activity.

Distribution & Transmission: Distribution & Transmission revenues climbed 174.0% year over year to $1,315.0 million. Operating profit was $78 million, compared with $37 million in the year-earlier quarter. The segment results were helped by contribution from newly merged entities. However, operating margin came in at 5.9%, down from 7.7% in the third quarter of 2011.


Backlog for capital equipment orders for the company's Rig Technology segment was $11,660.0 million at September 30, 2012, up 3% from the previous quarter level.

Balance Sheet

At the end of the third quarter, the company had cash on hand of $1,702.0 million and debt of $1,529.0 million. The debt-to-capitalization ratio stood at approximately 7.2%.

Rating & Recommendation

National Oilwell Varco, which ranks ahead of Cameron International Corp. ( CAM ) as the biggest U.S. maker of oilfield equipment, is currently a Zacks #2 Rank (Buy) stock, implying that it is expected to perform better than the broader U.S. equity market over the next one to three months.

Longer term, we are maintaining our Neutral recommendation on National Oilwell Varco shares.

CAMERON INTL (CAM): Free Stock Analysis Report

NATL OILWELL VR (NOV): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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