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National Oilwell Varco (NOV): What???s Up in Q4 Earnings?

Houston, TX-based energy equipment manufacturer National Oilwell Varco Inc.NOV is expected to release fourth-quarter 2016 financial results on Feb 7, before the opening bell.

Last quarter, the company posted a negative earnings surprise of 21.43%. Moreover, National Oilwell had an average negative earnings surprise of 6.01% in the last four quarters. Let's see how things are shaping up for this announcement.

Factors Likely to Influence This Quarter

National Oilwell Varco 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 it a steady recurring revenue stream through demand for maintenance, parts and other expendable products. This should have a positive impact on the fourth-quarter results as well.

National Oilwell Varco, Inc. Price, Consensus and EPS Surprise

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

We appreciate the drilling equipment maker's cost-reduction efforts and its large installed base of worldwide rigs that ensure steady revenue generation. Moreover, the recent OPEC deal and the subsequent advancement of crude oil has prompted producers to revive spending on drilling activities. This is expected to spur rig count, in turn, boosting income for the company.

However, the ongoing weakness in commodity prices - despite the recent OPEC-driven recovery - has curtailed energy drilling and equipment demand, thereby affecting the company's revenues, earnings and cash flow.

Earnings Whispers

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

Zacks ESP: The company currently has an Earnings ESP of -6.90%. This is because the Most Accurate estimate is pegged at a loss of 31 cents and the Zacks Consensus Estimate stands at a loss of 29 cents per share.

Zacks Rank: National Oilwell carries a Zacks Rank #3, which increases the predictive power of ESP. However, a negative ESP makes surprise prediction difficult.

The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the energy space that, according to our model, have the right combination of elements to post an earnings beat this quarter.

W&T Offshore, Inc. WTI is expected to release fourth-quarter earnings results around Mar 14. The company has an Earnings ESP of +73.91% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Sprague Resources LP SRLP has an Earnings ESP of +3.64% and a Zacks Rank #2. The partnership is anticipated to release fourth-quarter earnings around Mar 9.

Pioneer Natural Resources Company PXD has an Earnings ESP of +10.00% and a Zacks Rank #2. The company is likely to release fourth-quarter earnings around Feb 7.

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

Pioneer Natural Resources Company (PXD): Free Stock Analysis Report

W&T Offshore, Inc. (WTI): Free Stock Analysis Report

Sprague Resources LP (SRLP): 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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