Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

On May 15, Zacks Investment Research downgraded oilfield services behemoth, National Oilwell Varco Inc. (NOV - Analyst Report), to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

National Oilwell has witnessed sharp downward estimate revisions after reporting disappointing first-quarter 2013 results.

On Apr 26, 2013, National Oilwell reported first-quarter earnings per share (excluding transaction costs) of $1.29, missing the Zacks Consensus Estimate by 8 cents and the year-ago adjusted earnings by 15 cents. The result was affected by lower operating margin in all its segments.  

Following the weaker-than-expected earnings announcement, the Zacks Consensus Estimate for the second quarter of 2013 has moved down by 12 cents (or 8.2%) to $1.34 per share over the last 30 days. For the full year also, most of the estimates (15 out of 17) were revised downward over the same timeframe, pulling down the Zacks Consensus Estimate by 7.8% to $5.65 per share.

Moreover, with new competitors entering the market and the narrowing of capital expenditure by the drilling contractors, National Oilwell – which ranks ahead of Cameron International Corp. (CAM - Analyst Report) as the biggest U.S. maker of oilfield equipments – has seen its new equipment package pricing fall around 10% below the levels achieved during the peak of 2007–2008.

In particular, National Oilwell’s margins have been hit hard by the ongoing North American drilling slump. We expect the situation – characterized by tepid demand and weak pricing – to normalize in late 2013.

Stocks that Warrant a Look

While we expect National Oilwell to perform below its peers and industry levels in the coming months and see little reason for investors to own the stock, one can look at Matrix Service Company (MTRX - Snapshot Report) and Natural Gas Services Group Inc. (NGS - Snapshot Report) as good buying opportunities. These oil field machinery and equipment providers – carrying a Zacks Rank #2 (Buy) – have solid secular growth stories and are expected to outperform the broader U.S. equity market over the next 1 to 3 months.
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%