On Mar 16, Zacks Investment Research upgraded oilfield
National Oilwell Varco Inc.
) to a Zacks Rank #3 (Hold).
CAMERON INTL (CAM): Free Stock Analysis
CALUMET SPECLTY (CLMT): Free Stock Analysis
MARATHON PETROL (MPC): Free Stock Analysis
NATL OILWELL VR (NOV): Free Stock Analysis
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Why the Upgrade?
Houston, Texas based NOV boasts of a healthy backlog, solid
balance sheet and strength in international operations,
particularly in the Middle East and Brazil. The just-completed
Robbins & Myers acquisition will further boost NOV's earnings
visibility by expanding its blowout preventer product line; a
critical safety machine for a well. The recent influx of offshore
rig awards adds to the positive sentiment.
NOV 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 for a steady recurring
revenue stream through demand for maintenance, parts and other
NOV's recent $2.5 billion acquisition of smaller rival Robbins
& Myers will allow the energy equipment contractor to broaden
scale and scope of the solutions that it offers to oil and gas
customers worldwide. In particular, the move will help NOV to
strengthen its position as a supplier of blowout preventer (a
critical safety machine that can shut a well off in case of an
emergency), as Robbins & Myers is the fourth-largest maker of
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.
NOV is well positioned to supply such technologically-advanced
However, with new competitors entering the market and shrinkage
of capital expenditure spending by the drilling contractors, NOV
- which ranks ahead of
Cameron International Corp.
) as the biggest U.S. maker of oilfield equipment - has seen its
new equipment package pricing fall around 10% below the levels
achieved during the peak of 2007-2008.
In particular, NOV'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
only sometime in late 2013.
Stocks That Warrant a Look
While we expect NOV to perform in line with its peers and
industry levels in the coming months and advice investors to wait
for a better entry point before accumulating shares, one can look
Calumet Specialty Products Partners L.P.
Marathon Petroleum Corp.
) as good buying opportunities. These oil refiners and marketers
- sporting a Zacks Rank #1 (Strong Buy) - have solid secular
growth stories with potential to rise significantly from current