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NOV Slides Despite Cruising Past Q4 Earnings: Here's Why
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The stock of NOV Inc. (NOV - Free Report) has lost 7.3% since its fourth-quarter results were announced on Feb 6. The negative response, despite the earnings beat, could be attributed to the oil and gas equipment company’s cautious first-quarter outlook on account of typical seasonality.
NOV posted a net income of 26 cents per share, which was 3 cents better than the Zacks Consensus Estimate and marked a turnaround from the year-ago loss of 6 cents. The outperformance reflects improving momentum in international markets.
NOV’s total revenues of $2.1 billion surpassed the Zacks Consensus Estimate by 6.5% and rose 36.7% from the year-ago sales of $1.5 billion.
Rig Technologies: The unit produced $620 million in fourth-quarter revenues, which comfortably went past the Zacks Consensus Estimate of $550 million and also compared favorably with the year-ago quarter’s $431 million. Adjusted EBITDA of $88 million outpaced the Zacks Consensus Estimate of $62 million and more than quadrupled from the fourth-quarter 2021 figure of $21 million. The segment’s results were buoyed by strong aftermarket operations in tandem with the recovery in global supply chains, plus higher capital equipment deliveries.
Wellbore Technologies: NOV’s Wellbore Technologies segment’s revenues of $762 million increased 32.3% year over year in the fourth quarter of 2022 but fell marginally short of the consensus mark (by 0.8%). While the unit’s adjusted EBITDA of $146 million was up 65.9% from the year-earlier quarter’s profit of $88 million, the same missed the Zacks Consensus Estimate of $162 million. The mixed comparisons could be attributed to solid improvements in the international markets, offset by plateauing North America results, the delayed shipments of drill pipe and motors, plus the related cost escalation to speed up client orders.
Completion & Production Solutions: Compared to a year ago, the segment’s revenues improved 34.4% to $738 million and beat the Zacks Consensus Estimate of $684 million. Moreover, the unit’s adjusted EBITDA of $66 million skyrocketed from the year-ago quarter’s income of $2 million and came well ahead of the consensus mark of $50 million, primarily due to elevated completion equipment demand, improved response to the supply chain-reply issues, better pricing and the segment’s growing backlog of offshore projects.
Backlog
At the end of 2022, NOV’s capital equipment order backlog for Rig Technologies was $2.79 billion, including $254 million worth of new orders. The company’s Completion & Production Solutions operations currently have a $1.6 billion backlog, comprising $557 million of new orders.
Balance Sheet
As of Dec 31, 2022, the company had cash and cash equivalents of $1.1 billion and long-term debt of $1.7 billion, with a debt-to-capitalization of 25.1%.
Outlook
NOV, which budgeted a capital spending of $275 million this year, remains optimistic about the improving outlook for international and offshore markets in particular. As a result, the company's longer-cycle business orders will likely perk up in 2023 and beyond. Agreed, the current weakness in North American natural gas prices and recession-related headwinds might hinder oilfield activity. However, years of underinvestment and the focus on demand for capacity expansion across oil and gas plays, should stand players like NOV in good stead.
Zacks Rank & Key Picks
NOV — one of the world's biggest manufacturers of drilling equipment. — carries a Zacks Rank #3 (Hold) at present.
Murphy USA: Over the past 60 days, this El Dorado, AR-based Murphy USA has seen the Zacks Consensus Estimate for 2023 improve 6.2%. MUSA, which enjoys an overall VGM Score of A, is valued at around $6 billion.
Murphy USA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 43.4%. MUSA has seen its shares gain 49.3% in a year.
ProPetro Holding: ProPetro is valued at some $1.1 billion. The Zacks Consensus Estimate for PUMP’s 2023 earnings has been revised 33.3% upward over the past 60 days.
ProPetro Holding, headquartered in Midland, TX, beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters. PUMP shares have lost 23.2% in a year.
Sunoco LP: SUN beat the Zacks Consensus Estimate for earnings twice in the trailing four quarters. Sunoco enjoys an overall VGM Score of A.
Sunoco is valued at around $4.7 billion. SUN has seen its shares gain 10% in a year.
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NOV Slides Despite Cruising Past Q4 Earnings: Here's Why
The stock of NOV Inc. (NOV - Free Report) has lost 7.3% since its fourth-quarter results were announced on Feb 6. The negative response, despite the earnings beat, could be attributed to the oil and gas equipment company’s cautious first-quarter outlook on account of typical seasonality.
NOV posted a net income of 26 cents per share, which was 3 cents better than the Zacks Consensus Estimate and marked a turnaround from the year-ago loss of 6 cents. The outperformance reflects improving momentum in international markets.
NOV’s total revenues of $2.1 billion surpassed the Zacks Consensus Estimate by 6.5% and rose 36.7% from the year-ago sales of $1.5 billion.
NOV Inc. Price, Consensus and EPS Surprise
NOV Inc. price-consensus-eps-surprise-chart | NOV Inc. Quote
Segment Performances
Rig Technologies: The unit produced $620 million in fourth-quarter revenues, which comfortably went past the Zacks Consensus Estimate of $550 million and also compared favorably with the year-ago quarter’s $431 million. Adjusted EBITDA of $88 million outpaced the Zacks Consensus Estimate of $62 million and more than quadrupled from the fourth-quarter 2021 figure of $21 million. The segment’s results were buoyed by strong aftermarket operations in tandem with the recovery in global supply chains, plus higher capital equipment deliveries.
Wellbore Technologies: NOV’s Wellbore Technologies segment’s revenues of $762 million increased 32.3% year over year in the fourth quarter of 2022 but fell marginally short of the consensus mark (by 0.8%). While the unit’s adjusted EBITDA of $146 million was up 65.9% from the year-earlier quarter’s profit of $88 million, the same missed the Zacks Consensus Estimate of $162 million. The mixed comparisons could be attributed to solid improvements in the international markets, offset by plateauing North America results, the delayed shipments of drill pipe and motors, plus the related cost escalation to speed up client orders.
Completion & Production Solutions: Compared to a year ago, the segment’s revenues improved 34.4% to $738 million and beat the Zacks Consensus Estimate of $684 million. Moreover, the unit’s adjusted EBITDA of $66 million skyrocketed from the year-ago quarter’s income of $2 million and came well ahead of the consensus mark of $50 million, primarily due to elevated completion equipment demand, improved response to the supply chain-reply issues, better pricing and the segment’s growing backlog of offshore projects.
Backlog
At the end of 2022, NOV’s capital equipment order backlog for Rig Technologies was $2.79 billion, including $254 million worth of new orders. The company’s Completion & Production Solutions operations currently have a $1.6 billion backlog, comprising $557 million of new orders.
Balance Sheet
As of Dec 31, 2022, the company had cash and cash equivalents of $1.1 billion and long-term debt of $1.7 billion, with a debt-to-capitalization of 25.1%.
Outlook
NOV, which budgeted a capital spending of $275 million this year, remains optimistic about the improving outlook for international and offshore markets in particular. As a result, the company's longer-cycle business orders will likely perk up in 2023 and beyond. Agreed, the current weakness in North American natural gas prices and recession-related headwinds might hinder oilfield activity. However, years of underinvestment and the focus on demand for capacity expansion across oil and gas plays, should stand players like NOV in good stead.
Zacks Rank & Key Picks
NOV — one of the world's biggest manufacturers of drilling equipment. — carries a Zacks Rank #3 (Hold) at present.
Meanwhile, investors interested in the energy sector might look at operators like Murphy USA (MUSA - Free Report) , ProPetro Holding (PUMP - Free Report) and Sunoco LP (SUN - Free Report) , each carrying a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA: Over the past 60 days, this El Dorado, AR-based Murphy USA has seen the Zacks Consensus Estimate for 2023 improve 6.2%. MUSA, which enjoys an overall VGM Score of A, is valued at around $6 billion.
Murphy USA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 43.4%. MUSA has seen its shares gain 49.3% in a year.
ProPetro Holding: ProPetro is valued at some $1.1 billion. The Zacks Consensus Estimate for PUMP’s 2023 earnings has been revised 33.3% upward over the past 60 days.
ProPetro Holding, headquartered in Midland, TX, beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters. PUMP shares have lost 23.2% in a year.
Sunoco LP: SUN beat the Zacks Consensus Estimate for earnings twice in the trailing four quarters. Sunoco enjoys an overall VGM Score of A.
Sunoco is valued at around $4.7 billion. SUN has seen its shares gain 10% in a year.