Earnings Preview: National Oilwell

Oilfield services company National Oilwell Varco (NOV - Analyst Report) is scheduled to report its fourth quarter and full year 2011 results on February 2, 2012, before the opening bell.

The Zacks Consensus Estimate for the upcoming quarter is a profit of $1.30 per share on revenues of $110.4 billion. For the full year, our earnings per share projection is $4.69 on revenues of $470.1 billion.

Third Quarter 2011 Recap

National Oilwell reported better-than-expected third-quarter 2011 results earnings per share (excluding transaction charges) of $1.26, comfortably above the Zacks Consensus Estimate of $1.17 and the year-ago adjusted profit of 97 cents.

Quarterly revenue rose 24.2% year over year from $3,011.0 million to $3,740.0 million and was 2.4% above our projection.

(Read our full coverage on this earnings report: National Oilwell 3Q Earnings Jump)

Agreement of Analysts

Analysts exhibit a positive sentiment for National Oilwell in the upcoming quarter based on its strong financial base, robust backlog, improved outlook in the drilling scenario and the company’s technologically sophisticated drilling equipments.

For the fourth quarter, out of the 20 analysts covering the stock, 3 analysts have increased their estimates, while none decreased the same in the last 30 days. In the last 7 days, only one analyst has revised the estimate upward while none moved in the opposite direction.

For fiscal 2011, 2 analysts (out of 21 analysts) hiked their estimates while none reduced the projection over the past one month. In the last seven days, no estimate revision was noticed.

Magnitude of Estimate Revisions

Considering the analysts’ earnings revision, the Zacks Consensus Estimate for the fourth quarter upped by a penny to $1.30 in the last 30 days. Over the past 7 days, the estimate remained unchanged

For the full year, estimate remained static at $4.69 over the last one month and one week.

Surprise History

The company has a history of positive earnings surprises, surpassing the Zacks Consensus Estimate in 3 of the last 4 quarters. The company recorded a minimum surprise of negative 0.99% in first quarter 2011 to a maximum of 12.87% in second quarter 2011. On an average, the earnings surprise stood at 7.24%.

Our Recommendation

We are maintaining our long-term Neutral recommendation on National Oilwell shares.

We appreciate the company’s healthy backlog, solid balance sheet and strength in international operations, particularly in the Middle East and Brazil. The APL acquisition has further boosted National Oilwell’s earnings visibility by expanding its floating production storage and offloading vessel (“FPSO”) productline; one of the fastest-growing areas of the offshore market.

However, we believe that the shares of National Oilwell are fairly valued at current levels, considering the sensitivity of the business to gas/oil price volatility, as well as exploration and production spending patterns, costs, geo-political risks, competition and the advent of new technologies.

Another prominent energy service firm, Cameron International Corporation (CAM - Analyst Report) will also report its fourth quarter earnings tomorrow.

Read the full analyst report on NOV

Read the full analyst report on CAM