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National Oilwell (NOV): What Awaits this Earnings Season?

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Energy equipment maker National Oilwell Varco Inc.NOV is expected to release third-quarter 2015 results before the opening bell on Wednesday, Oct 28.

The company had reported better-than-expected earnings in the past beating the Zacks Consensus Estimate in each of the trailing four quarters. The average positive surprise is 16.27%.

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

Factors to Consider

Houston, TX based National Oilwell is a world leader in the design, manufacture, and sale of comprehensive systems, components, products, and equipment used in oil and gas drilling and production worldwide.

It is common knowledge that the overall operation is positively correlated with oil price. This is because, the lower the price of the commodity, the fewer will be the incentives for the upstream players to explore and drill more wells and hence weaker will be the demand for drilling equipment.

During the third quarter, most of the times, crude traded below $50 per barrel. In fact, sometimes the commodity even traded below $40 per barrel. Overall, the pricing environment was not favorable for upstream operations and not supportive to drilling equipment makers.

Earnings Whispers

Our proven model does not conclusively show that National Oilwell is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP : Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -5.36%. The Most Accurate estimate for National Oilwell stands at 53 cents while the Zacks Consensus Estimate is pegged higher at 56 cents.

Zacks Rank: National Oilwell carries a Zacks Rank #3 (Hold). Though a favorable Zacks Rank increases the predictive power of ESP, the company's ESP of -5.36% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While an earnings beat looks uncertain for National Oilwell, here are some firms, which have the right combination of elements to post an earnings beat this quarter:

Exterran Partners LP EXLP has Earnings ESP of +19.23% and a Zacks Rank #1 (Strong Buy). The company is expected to release earnings on Nov 3.

Natural Gas Services Group Inc. NGS has Earnings ESP of +21.05% and a Zacks Rank #1. The company is anticipated to release earnings on Nov 5.

Swift Energy Co SFY has Earnings ESP of +11.11% and a Zacks Rank #2 (Buy). The company is likely to release earnings on Nov 5.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NATL OILWELL VR (NOV): Free Stock Analysis Report

SWIFT ENERGY CO (SFY): Free Stock Analysis Report

EXTERRAN PTNRS (EXLP): Free Stock Analysis Report

NATURAL GAS SVC (NGS): 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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