NOV Q3 Earnings Beat, Sales Miss - Analyst Blog

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Global large-cap energy equipment maker National Oilwell Varco Inc. ( NOV ) reported better-than-expected second quarter earnings, buoyed by rising international demand. Earnings per share (excluding transaction costs and one time gains) came in at $1.34, above the Zacks Consensus Estimate of $1.32

However, NOV's performance deteriorated considerably from the year-ago adjusted profit of $1.52 per share amid a choppy North American market.

Quarterly revenue jumped 6.9% year over year - from $5,319.0 million to $5,687.0 million - but was just short of the Zacks Consensus Estimate of $5,696.0 million. .

Segmental Performance

Rig Technology: Revenue in the Rig Technology segment increased 11.6% year over year to $2,843.0 million, while revenue out of backlog was up 10% from the corresponding period last year. However, the segment's operating profit was down marginally (by 0.7% year over year) to $606.0 million.

Rig Technology's profitability during the quarter was hampered by the soft North American market and price cuts. Operating margin, at 21.3%, dipped from 23.9% in the year-ago period.

Petroleum Services & Supplies: The company's Petroleum Services & Supplies segment achieved revenues of $1,809.0 million, up 5.4% from the year-ago period, though operating profit declined 15.4% from the third quarter of 2012 to $324 million. Operating margin was 17.9% versus 22.3% in the year-ago quarter. The negative comparisons were due to the slow pace of land drilling purchases.

Distribution & Transmission: Distribution & Transmission revenues climbed 2.6% year over year to $1,342.0 million. Operating profit was $78 million, flat from the year-earlier quarter. The segment results were held up by contribution from the Robbins & Myers acquisition and rising international demand. However, operating margin came in at 5.8%, down from 5.9% in the third quarter of 2012 due to changing mix.

Backlog

Backlog for capital equipment orders for the company's Rig Technology segment was a record $15,150.0 million at Sep 30, 2013, up 30% from the previous quarter level.

Balance Sheet

At the end of the third quarter, the company had cash on hand of $2,741.0 million and debt of $3,749.0 million. The debt-to-capitalization ratio stood at approximately 14.7%.

Zacks Rank & Stock Picks

NOV, which ranks ahead of Cameron International Corp. ( CAM ) as the biggest U.S. maker of oilfield equipment, 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.

Meanwhile, one can look at Matador Resources Co. ( MTDR ) and Northern Oil & Gas Inc. ( NOG ) as good buying opportunities. These domestic upstream energy operators - sporting a Zacks Rank #1 (Strong Buy) - have solid secular growth stories with potential to rise significantly from current levels.



CAMERON INTL (CAM): Free Stock Analysis Report

MATADOR RESOURC (MTDR): Free Stock Analysis Report

NORTHRN OIL&GAS (NOG): 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 The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CAM , MTDR , NOG , NOV



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