National Oilwell Beats on Earnings, Revs - Analyst Blog

Global large-cap energy equipment maker, National Oilwell Varco ( NOV ), reported strong fourth-quarter 2013 results, aided by robust activity levels as well as good project execution skills. Rig Technology and Petroleum Services & Supplies, the two major segments of the company, managed to significantly improve revenues and operating profit over the year-ago period.

Earnings per share (excluding transaction costs) came in at $1.56, exceeding the Zacks Consensus Estimate of $1.39 per share and comfortably beating the year-ago adjusted profit by 5.0%. Quarterly revenues jumped 8.6% year over year from $5,685.0 million to $6,172.0 million and also managed to beat the Zacks Consensus Estimate of $5,840.0 million.

For the fiscal year ended Dec 31, 2013, National Oilwell reported per share adjusted profits of $5.52, above the Zacks Consensus Estimate of $5.35. However, the figure was 6.6% down from the year-ago adjusted profit. Revenues of $22.8 billion were 13.6% above the prior-year figure and 1.8% higher from the Zacks Consensus Estimate.

Segmental Performance

Rig Technology: Revenues in the Rig Technology segment surged 14.3% year over year to $3,310 million, while revenues generated from project backlog rose up 14% from the corresponding period last year.

The segment's operating profit was up 7.6% year over year to $697.0 million. Rig Technology's profitability during the quarter was aided by higher demand for capital equipment used for new build offshore rigs. However, operating margin was recorded at 21.1%, down from 22.4% in the year-ago period.

Petroleum Services & Supplies: The company's Petroleum Services & Supplies segment achieved revenues of $1,925.0 million, up 8.8% from the year-ago period, while operating profit climbed 3.1% from the fourth quarter of 2012 to $366.0 million.

Operating margin stood at 19.0% versus 20.1% in the year-ago quarter.

Distribution & Transmission: Distribution & Transmission revenues fell 1.2% year over year to $1,253.0 million. Operating profit was $60.0 million compared with $78.0 million in the year-earlier quarter. Moreover, operating margin came in at 4.8%, down from 6.2% in the year-ago quarter.


As of Dec 31, 2013, capital equipment orders' backlog in the Rig Technology business unit came in at a record $16.24 billion, reflecting an increase of 37% from the year-ago quarter level.

Balance Sheet

At the end of fourth-quarter 2013, the company's cash on hand stood at $3,436.0 million and debt reached $3,150.0 million. The debt-to-capitalization ratio came in at approximately 12.4%.

Zacks Rating

National Oilwell relies on its ability to develop and acquire essential products and technologies that drive its operational performance and growth. If the company's technologies and/or products become obsolete, or it cannot bring them to market in a timely and competitive manner, it may face severe operational and financial dilemmas.

Houston, Texas-based National Oilwell currently retains a Zacks Rank #4 (Sale), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the energy sector like Marathon Petroleum Corp. ( MPC ), Clayton Williams Energy Inc. ( CWEI ) and Profire Energy Inc. ( PFIE ). All these stocks sport a Zacks Rank #1 (Strong Buy).

WILLIAMS(C)ENGY (CWEI): Free Stock Analysis Report

MARATHON PETROL (MPC): 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.

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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