We issued an updated research report on National Oilwell Varco Inc. (NOV - Free Report) on Aug 16, 2016. National Oilwell is one of the biggest manufacturers of drilling equipment in the world. We appreciate the company’s large installed base of worldwide rigs that provides a steady recurring revenue stream. However, while being incrementally more positive on National Oilwell, we expect its shares to suffer until commodity prices recover sufficiently.
This is reflected in National Oilwell’s current Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
The growing search for oil into deepwater frontiers has increased demand for rigs capable of tackling huge challenges of drilling in a mile or more of water. National Oilwell, having an impressive business model, is well positioned to supply such equipment. Presently, the company is also investing in its cost reduction efforts and efficiency gains.
Owing to all those positives, National Oilwell was able to report narrower-than-expected loss in the second quarter. Loss per share (excluding one-time items) came in at 30 cents, narrower than the Zacks Consensus Estimate of a loss of 33 cents.
We can also say that recovery on the crude front from the mid-Feb lows will likely encourage oil producers to revive their spending on drilling activities. This, in turn, will result in improved demand for oilfield equipment, which will in turn drive the company’s revenues, earnings and cash flow.
However, although oil recovered from the record lows it reached during mid-Feb the commodity is way below the mark it traded during mid-2014. Hence, until and unless there is sufficient recovery in oil price we expect the company’s shares to remain soft.
Moreover, since National Oilwell conducts operations in many countries – with a major portion of its total revenue coming from international markets – the company is exposed to risks associated with doing business abroad. Such risks include embargoes and/or expropriation of assets, exchange rate risks, terrorism and political/civil sentiment.
Stocks to Consider
Some better-ranked players in the energy sector are Devon Energy Corporation (DVN - Free Report) , Murphy USA Inc. (MUSA - Free Report) and North Atlantic Drilling Limited . Each of these stocks sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
We issued an updated research report on National Oilwell Varco Inc. (NOV - Free Report) on Aug 16, 2016. National Oilwell is one of the biggest manufacturers of drilling equipment in the world. We appreciate the company’s large installed base of worldwide rigs that provides a steady recurring revenue stream. However, while being incrementally more positive on National Oilwell, we expect its shares to suffer until commodity prices recover sufficiently.
This is reflected in National Oilwell’s current Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
The growing search for oil into deepwater frontiers has increased demand for rigs capable of tackling huge challenges of drilling in a mile or more of water. National Oilwell, having an impressive business model, is well positioned to supply such equipment. Presently, the company is also investing in its cost reduction efforts and efficiency gains.
Owing to all those positives, National Oilwell was able to report narrower-than-expected loss in the second quarter. Loss per share (excluding one-time items) came in at 30 cents, narrower than the Zacks Consensus Estimate of a loss of 33 cents.
We can also say that recovery on the crude front from the mid-Feb lows will likely encourage oil producers to revive their spending on drilling activities. This, in turn, will result in improved demand for oilfield equipment, which will in turn drive the company’s revenues, earnings and cash flow.
However, although oil recovered from the record lows it reached during mid-Feb the commodity is way below the mark it traded during mid-2014. Hence, until and unless there is sufficient recovery in oil price we expect the company’s shares to remain soft.
Moreover, since National Oilwell conducts operations in many countries – with a major portion of its total revenue coming from international markets – the company is exposed to risks associated with doing business abroad. Such risks include embargoes and/or expropriation of assets, exchange rate risks, terrorism and political/civil sentiment.
Stocks to Consider
Some better-ranked players in the energy sector are Devon Energy Corporation (DVN - Free Report) , Murphy USA Inc. (MUSA - Free Report) and North Atlantic Drilling Limited . Each of these stocks sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Get the latest research report on DVN - FREE
Get the latest research report on NOV - FREE
Get the latest research report on MUSA - FREE