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National Oilwell Varco (NOV) Up 4.6% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for National Oilwell Varco (NOV - Free Report) . Shares have added about 4.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is National Oilwell Varco due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

National Oilwell Posts Narrower-Than-Expected Q2 Loss, Revenues Miss Mark

National Oilwell Varco, Inc. reported adjusted loss of 7 cents per share for second-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of 11 cents. Particularly, better-than-expected revenues from the Completion & Production Solutions segment led to this outperformance. However, the bottom line came wider than the year-ago loss of 4 cents due to weakness in the Rig Technologies and the Wellbore Technologies unit.

Total revenues of $1.50 billion underperformed the Zacks Consensus Estimate of $1.54 billion and also dipped 29.8% from the year-ago number of $2.13 billion.

The oil & gas industry is suffering heavy economic damages triggered by the COVID-19 pandemic that drastically affected drilling activity. Against this backdrop, National Oilwell is aggressively curbing expenses and driving cash flow through more prudent strategies and a disciplined working capital deployment.

Segmental Performance

Rig Technologies: Revenues summed $476 million, which missed the Zacks Consensus Estimate of $498 million and also compared unfavorably with the year-ago quarter’s $671 million, thanks to a drop in the global rig activity and a decline in aftermarket revenues, resulting from coronavirus-induced logistics troubles. The unit’s adjusted EBITDA of $14 million decreased from the year-earlier quarter’s $74 million.

Wellbore Technologies: Segmental revenues of $442 million lagged the Zacks Consensus Estimate of $494 million and also fell 48% year over year as a result of reduced drilling operations in North America and Latin America. Meanwhile, the unit’s adjusted EBITDA of $42 million deteriorated from the prior-year’s $134 million.

Completion & Production Solutions: Revenues of $611 million outperformed the Zacks Consensus Estimate of $600 million but dropped 7.84% from $663 million in the year-earlier quarter. This could be attributable to dwindling situations in the global completions market and logistical troubles from COVID-19-related restrictions, which were partially offset by a strong execution of existing backlog. The unit recorded adjusted EBITDA of $68 million, up 30.8% from the year-ago figure of $52 million.

Backlog

Capital equipment order backlog for Rig Technologies was $2.79 billion as of Jun 30, 2020 including $74 million worth of new orders.

Meanwhile, the Completion & Production Solutions’ backlog for capital equipment orders totalled $1 billion at the end of the second quarter. The figure included $196 million worth of new orders.

Balance Sheet

As of Jun 30, 2020, the company had cash and cash equivalents of $1.45 billion and long-term debt of $2.03 billion. The total debt-to-total capitalization was 26.8%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 37.14% due to these changes.

VGM Scores

At this time, National Oilwell Varco has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, National Oilwell Varco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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