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
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.
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