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Is National Oilwell (NOV) Poised for a Beat in Q3 Earnings?

National Oilwell Varco, Inc.NOV is set to release third-quarter 2017 results after the closing bell on Oct 26.

Houston, TX-based National Oilwell is a world leader in the designing, manufacturing and selling of comprehensive systems, components, products, and equipment used in oil and gas drilling and production worldwide.

National Oilwell Varco has a good track record of earnings surprise history courtesy of its cost-reduction initiatives and improved efficiencies. The company has posted average positive earnings surprise of 10.46% in the trailing four quarters.

National Oilwell Varco, Inc. Price and EPS Surprise

National Oilwell Varco, Inc. Price and EPS Surprise | National Oilwell Varco, Inc. Quote

Let's see how things are shaping up for this announcement.

Factors to Consider

Prices of oil at the end of the third quarter were $51.67 per barrel, up about 10.5% sequentially amid tightening supplies, improving demand outlook and OPEC deal extension talks. The energy equipment supplier is poised to benefit from recovering commodity prices.

The Zacks Consensus Estimate of the backlog for the Completion & Production Solutions segment stands at $898 million compared with $881 million recorded in the prior quarter and $821 million in the year-ago quarter. Backlog orders for the Rig Systems is pegged at $145 million compared with $124 million recorded in the previous quarter.

Rising momentum in the U.S. markets and modest improvement in international markets along with increasing consumer demand are likely to improve the revenues of the company. The Zacks Consensus Estimate for the revenues of the Wellbore Technology segment is $672 million compared with $614 million reported in second-quarter 2017 and $526 million recorded in the year-ago quarter. Revenues for the Completion & Production Solutions segment is estimated at $679 million for third-quarter of 2017 compared with $652 million reported in the prior quarter and $543 million recorded in the year-ago quarter. Revenues for the Rig Aftermarket segment is estimated at $349 million compared with $341 million recorded in the previous quarter and $322 million in the year-ago quarter. For the Rig Systems segment, the Zacks Consensus Estimate for revenues is $356 million compared with $346 million in second-quarter 2017.

We appreciate the company's cost-reduction initiatives and efficiency gains. We believe that the strong execution of projects and cost-containment efforts will lead to positive results. As such, the Zacks Consensus Estimate of EBITDA for the Wellbore Technology segment is pegged at $93 million, way higher than $26 million recorded in the year-ago quarter.

The 10-year joint venture with Saudi Aramco is likely to strengthen National Oilwell's drilling technology franchise and its financials. The company has a clean balance sheet with impressive liquidity and coverage ratios providing it ample flexibility when compared to most of its peers.

All these positive factors are also reflected in the price movement of the company. Shares of the company have rallied 8.5% outperforming the broader industry 's gain of 6.3% during the third quarter.

What Does Our Model Unveil?

Our proven model shows that National Oilwell is likely to beat earnings in the to-be-reported quarter because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP for this company is +10.91%. This is because the Most Accurate estimate is at a loss of 7 cents, while the Zacks Consensus Estimate is pegged at a loss of 8 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: National Oilwellpresently carries a Zacks Rank #3 (Hold) which when combined with a positive ESP, makes us confident of an earnings beat.

Note that stocks with a Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Stocks With Favorable Combination

Here are some other companies from the energy space which, according to our model, also have the right combination of elements to deliver an earnings beat this quarter:

Unit Corporation UNT has an Earnings ESP of +29.17% and a Zacks Rank #3. The company is anticipated to release third-quarter earnings on Nov 3. You can see the complete list of today's Zacks #1 Rank stocks here.

Newpark Resources, Inc. NR has an Earnings ESP of +33.33% and a Zacks Rank #2. The company is anticipated to release third-quarter earnings on Oct 30.

Suncor Energy Inc. SU has an Earnings ESP of +8.07% and a Zacks Rank #2. The company is anticipated to release third-quarter earnings on Oct 25.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

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National Oilwell Varco, Inc. (NOV): Free Stock Analysis Report

Suncor Energy Inc. (SU): Free Stock Analysis Report

Unit Corporation (UNT): Free Stock Analysis Report

Newpark Resources, Inc. (NR): 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.


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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