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Why Is Nov Inc. (NOV) Down 8.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Nov Inc. (NOV - Free Report) . Shares have lost about 8.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nov Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
NOV Q1 Earnings Surpass Estimates, Revenues Increase Y/Y
NOV Inc. reported first-quarter 2023 adjusted net profit of 32 cents per share, which beat the Zacks Consensus Estimate of 22 cents. The bottom line also turned around from the year-ago quarter’s loss of 13 cents.
Total revenues of $2 billion surpassed the Zacks Consensus Estimate by 0.4%. The figure also rose 26.4% from the year-ago quarter’s level of $1.5 billion.
The improvement in both earnings and revenues can be attributed to the robust performance of NOV’s Rig Technologies and Completion & Production Solutions segment.
Segment Performances
Rig Technologies:The unit reported first-quarter revenues of $550 million, which beat the Zacks Consensus Estimate of $545 million. The figure also exceeded the prior-year quarter’s figure of $441 million. Adjusted EBITDA of $69 million beat the Zacks Consensus Estimate of $64 million. The actuals also increased from $36 million recorded in the corresponding period of 2022.
Wellbore Technologies:Revenues in this segment improved 22.5% to $745 million year over year. The figure, however, missed the Zacks Consensus Estimate of $762 million. Adjusted EBITDA of $133 million increased from the year-earlier quarter’s level of $101 million but missed the consensus mark of $146 million. This could be due to ongoing supply-chain issues that hampered the segment’s drill pipe operations.
Completion & Production Solutions:The segment’s revenues rose 35.4% to $718 million year over year. The top line also beat the Zacks Consensus Estimate of $701 million. Adjusted EBITDA of $54 million increased from the year-ago quarter’s level of $10 million. The figure also exceeded the consensus mark of $52 million, primarily due to better management of the ongoing supply-chain disruptions, an improved product mix and better execution of the company’s manufacturing plans.
Backlog
At the end of March 2023, order backlog for Rig Technologies’ capital equipment was $2.88 billion, including $251 million worth of new orders. The same for the Completion & Production Solutions segment was $1.60 billion, comprising $407 million worth of new orders.
Balance Sheet
As of Mar 31, 2023, the company had cash and cash equivalents of $774 million and long-term debt of $1.73 billion, with a debt-to-capitalization of 24.5%..
Outlook
Despite recent weakness in commodity prices, NOV's outlook for 2023 is positive for each of the three segments.
The company expects its floating rig count to recover soon from the pandemic. Based on the FID projection and current contracting rate, many more rigs are likely to be in demand by 2024.
For the second quarter, the company expects a mid-single-digit increase in revenues from the Completion & Production Solutions segment. It also anticipates EBITDA flow-through in the lower 30% range and EBITDA margin in low-double digits for 2023.
Activity growth in the Eastern Hemisphere and drill pipe manufacturing operations in Wellbore Technologies are expected to offset headwinds from softening activity in North America. This, in turn, is anticipated to cause a sequential revenue improvement in the mid-single-digit percent range for the second quarter.
The company also expects an inventory rise in the Rig Technologies segment. This is due to the flow of castings and forgings needed to support the unit’s backlog of spare parts, rig refurbishment and equipment repair. This inventory growth is expected to boost revenues in the second quarter and beyond.
This business unit is also expected to gain from increased activity in the Eastern Hemisphere and the recapture of additional high-spec drilling motor market share.
NOV is gaining wider adoption of its digital solutions through several agreements, including a recent global contract with a major integrated oil company to provide edge computing, edge-to-cloud and cloud-based solutions.
The company expects continued market share gains in North America, and incremental activities in the Gulf of Mexico and international markets for 2023.
It anticipates free cash flow in the range of $100-$300 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 10.69% due to these changes.
VGM Scores
At this time, Nov Inc. has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Nov Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Nov Inc. belongs to the Zacks Technology Services industry. Another stock from the same industry, Seagate (STX - Free Report) , has gained 5.8% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Seagate reported revenues of $1.86 billion in the last reported quarter, representing a year-over-year change of -33.6%. EPS of -$0.28 for the same period compares with $1.81 a year ago.
For the current quarter, Seagate is expected to post a loss of $0.17 per share, indicating a change of -110.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Seagate. Also, the stock has a VGM Score of B.
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Why Is Nov Inc. (NOV) Down 8.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Nov Inc. (NOV - Free Report) . Shares have lost about 8.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nov Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
NOV Q1 Earnings Surpass Estimates, Revenues Increase Y/Y
NOV Inc. reported first-quarter 2023 adjusted net profit of 32 cents per share, which beat the Zacks Consensus Estimate of 22 cents. The bottom line also turned around from the year-ago quarter’s loss of 13 cents.
Total revenues of $2 billion surpassed the Zacks Consensus Estimate by 0.4%. The figure also rose 26.4% from the year-ago quarter’s level of $1.5 billion.
The improvement in both earnings and revenues can be attributed to the robust performance of NOV’s Rig Technologies and Completion & Production Solutions segment.
Segment Performances
Rig Technologies: The unit reported first-quarter revenues of $550 million, which beat the Zacks Consensus Estimate of $545 million. The figure also exceeded the prior-year quarter’s figure of $441 million. Adjusted EBITDA of $69 million beat the Zacks Consensus Estimate of $64 million. The actuals also increased from $36 million recorded in the corresponding period of 2022.
Wellbore Technologies: Revenues in this segment improved 22.5% to $745 million year over year. The figure, however, missed the Zacks Consensus Estimate of $762 million. Adjusted EBITDA of $133 million increased from the year-earlier quarter’s level of $101 million but missed the consensus mark of $146 million. This could be due to ongoing supply-chain issues that hampered the segment’s drill pipe operations.
Completion & Production Solutions: The segment’s revenues rose 35.4% to $718 million year over year. The top line also beat the Zacks Consensus Estimate of $701 million. Adjusted EBITDA of $54 million increased from the year-ago quarter’s level of $10 million. The figure also exceeded the consensus mark of $52 million, primarily due to better management of the ongoing supply-chain disruptions, an improved product mix and better execution of the company’s manufacturing plans.
Backlog
At the end of March 2023, order backlog for Rig Technologies’ capital equipment was $2.88 billion, including $251 million worth of new orders. The same for the Completion & Production Solutions segment was $1.60 billion, comprising $407 million worth of new orders.
Balance Sheet
As of Mar 31, 2023, the company had cash and cash equivalents of $774 million and long-term debt of $1.73 billion, with a debt-to-capitalization of 24.5%..
Outlook
Despite recent weakness in commodity prices, NOV's outlook for 2023 is positive for each of the three segments.
The company expects its floating rig count to recover soon from the pandemic. Based on the FID projection and current contracting rate, many more rigs are likely to be in demand by 2024.
For the second quarter, the company expects a mid-single-digit increase in revenues from the Completion & Production Solutions segment. It also anticipates EBITDA flow-through in the lower 30% range and EBITDA margin in low-double digits for 2023.
Activity growth in the Eastern Hemisphere and drill pipe manufacturing operations in Wellbore Technologies are expected to offset headwinds from softening activity in North America. This, in turn, is anticipated to cause a sequential revenue improvement in the mid-single-digit percent range for the second quarter.
The company also expects an inventory rise in the Rig Technologies segment. This is due to the flow of castings and forgings needed to support the unit’s backlog of spare parts, rig refurbishment and equipment repair. This inventory growth is expected to boost revenues in the second quarter and beyond.
This business unit is also expected to gain from increased activity in the Eastern Hemisphere and the recapture of additional high-spec drilling motor market share.
NOV is gaining wider adoption of its digital solutions through several agreements, including a recent global contract with a major integrated oil company to provide edge computing, edge-to-cloud and cloud-based solutions.
The company expects continued market share gains in North America, and incremental activities in the Gulf of Mexico and international markets for 2023.
It anticipates free cash flow in the range of $100-$300 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 10.69% due to these changes.
VGM Scores
At this time, Nov Inc. has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Nov Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Nov Inc. belongs to the Zacks Technology Services industry. Another stock from the same industry, Seagate (STX - Free Report) , has gained 5.8% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Seagate reported revenues of $1.86 billion in the last reported quarter, representing a year-over-year change of -33.6%. EPS of -$0.28 for the same period compares with $1.81 a year ago.
For the current quarter, Seagate is expected to post a loss of $0.17 per share, indicating a change of -110.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Seagate. Also, the stock has a VGM Score of B.