About a month has gone by since the last earnings report for National Oilwell Varco, Inc.NOV . Shares have lost about 5.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
National Oilwell reported narrower-than-expected third-quarter 2017 loss on strong performance from Wellbore Technologies and Completion and Production Solutions segment.
Loss per share (excluding one-time items) came in at 7 cents compared with the Zacks Consensus Estimate of a loss of 8 cents. The bottom line also improved considerably from the year-ago period's loss of 34 cents.
Despite challenging market conditions and the disruption caused by Hurricane Harvey, the strong acceptance of National Oilwell Varco's new launches meant that adjusted EBITDA for the quarter was $167 million, reflecting an improvement of $25 million from the second quarter.
Third-quarter revenues of $1,835 million increased from $1,646 million a year ago but were below the Zacks Consensus Estimate of $1,869 million as customers continue to restrict capital spending to only bare essentials.
Rig Systems: Revenues came in at $330 million, down 29.8% from the year-ago quarter and below the Zacks Consensus Estimate of $356 million. The unit's adjusted EBITDA plunged 44% year over year to $28 million on deferred deliveries and scarcity of new equipment orders. However, it was ahead of the $25.3 million envisioned by analysts polled by Zacks as an amended agreement with a client resulted in wiping off around $100 million from the segment's backlog and a small gain.
Rig Aftermarket: The segment generated revenues of $311 million, down 3.4% from the year-ago period and unable to beat our projection of $349 million. Adjusted EBITDA dropped 14.8% from the third quarter of 2016 to $69 million and failed to match our projection of $87 million. Spare parts demand remains tepid due to weak market conditions, while an unfavorable product mix played its part too.
Wellbore Technologies: The segment's revenues beat the Zacks Consensus Estimate of $672 million and rose 31.7% year over year to $693 million. Importantly, the unit improved significantly from last year's adjusted EBITDA of $26 million to clock $94 million this time. The figure also managed to edge past our guidance of $93 million on higher volumes stemming from greater market adoption of the unit's new technology introductions.
Completion & Production Solutions: Revenues for the segment were recorded at $682 million, up 25.6% from $543 million in the year-ago quarter and just ahead of our $679 million estimate. The unit recorded adjusted EBITDA of $97 million, up from $43 million in the corresponding period last year and outperforming the Zacks Consensus Estimate of $93 million. Heightened land activity in North America and the Middle East impacted profitability.
Capital equipment orders' backlog for Rig Systems was $2,010 million as of Sep 30, including $84 million in new orders during the third quarter.
Moreover, Completion & Production Solutions segment reported a backlog of $974 million in capital equipment order as at the end of the third quarter. The figure - which surpassed the Zacks Consensus Estimate of $898 million - included $463 million in new orders.
As of Sep 30, the company, which last year teamed up with General Electric Co. (GE - Research Report) to provide industry-leading standardized interfaces, had cash and cash equivalents of $1,722 million and long-term debt of $2,707 million. The debt-to-capitalization ratio was approximately 16.1%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter.
National Oilwell Varco, Inc. Price and Consensus
At this time, the stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is solely suitable for growth investors.
Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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