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Global large-cap energy equipment maker, National Oilwell Varco (NOV - Analyst Report), 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.

Backlog

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 - Analyst Report), Clayton Williams Energy Inc. (CWEI - Snapshot Report) and Profire Energy Inc. (PFIE). All these stocks sport a Zacks Rank #1 (Strong Buy).

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