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NOV Beats on Q2 Earnings, Expects Breakeven Free Cash Flow
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NOV Inc. (NOV - Free Report) reported second-quarter 2023 adjusted earnings of 39 cents per share, which beat the Zacks Consensus Estimate of 30 cents. The outperformance can be attributed tothe better-than-expected performance of NOV’s Wellbore Technologies segment.
Moreover, the bottom line improved from the year-ago quarter’s level of 18 cents due to improving execution, customer demand and pricing.
Total revenues of $2.09 billion surpassed the Zacks Consensus Estimate by 1.14% and rose 20.8% from the prior-year period’s figure of $1.73 billion. This was primarily due to better-than-expected performances in major segments of the company.
Rig Technologies: The unit reported second-quarter revenues of $606 million, which beat our projection of $578.6 million. The figure also exceeded the prior-year quarter’s figure of $462 million.
Adjusted EBITDA of $71 million missed our estimate of $89.4 million. The actuals improved from $41 million recorded in the corresponding period of 2022 due to rising demand for this segment.
Wellbore Technologies: Revenues in this segment improved 20.7% to $804 million year over year. The figure beat our projection of $778.1 million.
Adjusted EBITDA of $164 million increased from the year-earlier quarter’s level of $122 million and also beat our estimate of $142.1 million. This was due to improved manufacturing throughput from the segment’s drill pipe operations, market share gains and improving demand from the international market.
Completion & Production Solutions: The segment’s revenues rose 17.8% to $753 million year over year. The top line also beat our projection of $751.5 million.
Adjusted EBITDA of $69 million increased from the year-ago quarter’s level of $32 million, primarily due to an improved product mix of international and offshore projects and better execution of NOV’s manufacturing plans. The figure, however, missed our estimate of $78.1 million.
Backlog
At the end of June 2023, the order backlog for Rig Technologies’ capital equipment was $2.89 billion, including $222 million worth of new orders. The same for the Completion & Production Solutions segment was $1.59 billion, comprising $450 million worth of new orders.
Balance Sheet
As of Jun 30, 2023, NOV had cash and cash equivalents of $592 million and long-term debt of $1.72 billion, with a debt-to-capitalization of 23.8%.
Outlook
The company anticipates that free cash flow will roughly break even in 2023 and exceed 50% of EBITDA in 2024.
It expects a slight revenue decline in the third quarter but a significant increase in the fourth quarter, thanks to a strong backlog and demand from international markets.
NOV expects to boost international and offshore activity to counter U.S. declines. For the Wellbore Technologies segment, it anticipates third-quarter revenues and EBITDA to be in line with the second- quarter level.
For the Completions & Production Solutions segment, the company expects growing demand from improving offshore markets to offset softer conditions in North America, causing third-quarter results to be in line with the second quarter.
Nevertheless, the building momentum in offshore markets is making us optimistic about the segment’s ability to attain low double-digit EBITDA margins by year-end.
The company anticipates a modest decline in XL Conductor Pipe Connection business in the third quarter, but increased shipments in the fourth quarter to support drilling programs.
NOV expects North America land operations to slow down in the third quarter due to higher commodity prices. However, drilling contractor customers are preparing for higher activity in 2024. International and offshore markets are anticipated to overcome North American headwinds with growing activity in West Africa, Asia, the North Sea, offshore Mexico and the Middle East.
Evolution Petroleum is worth approximately $307.07 million. EPM currently pays a dividend of 48 cents per share, or 5.20% on an annual basis.
The company currently has a forward P/E ratio of 8.55. In comparison, its industry has an average forward P/E of 13.40, which means EPM is trading at a discount to the group.
Murphy USA is valued at around $6.58 billion. In the past year, its shares have risen 5.8%
MUSA currently pays a dividend of $1.52 per share, or 0.50% on an annual basis. Its payout ratio currently sits at 6% of earnings.
NGL Energy Partners is valued at around $535.63 million. In the past year, its units have risen 149.1%.
The partnership currently has a forward P/E ratio of 4.67. In comparison, its industry has an average forward P/E of 16.20, which means NGL is trading at a discount to the group.
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NOV Beats on Q2 Earnings, Expects Breakeven Free Cash Flow
NOV Inc. (NOV - Free Report) reported second-quarter 2023 adjusted earnings of 39 cents per share, which beat the Zacks Consensus Estimate of 30 cents. The outperformance can be attributed tothe better-than-expected performance of NOV’s Wellbore Technologies segment.
Moreover, the bottom line improved from the year-ago quarter’s level of 18 cents due to improving execution, customer demand and pricing.
Total revenues of $2.09 billion surpassed the Zacks Consensus Estimate by 1.14% and rose 20.8% from the prior-year period’s figure of $1.73 billion. This was primarily due to better-than-expected performances in major segments of the company.
NOV Inc. Price, Consensus and EPS Surprise
NOV Inc. price-consensus-eps-surprise-chart | NOV Inc. Quote
Segmental Performances
Rig Technologies: The unit reported second-quarter revenues of $606 million, which beat our projection of $578.6 million. The figure also exceeded the prior-year quarter’s figure of $462 million.
Adjusted EBITDA of $71 million missed our estimate of $89.4 million. The actuals improved from $41 million recorded in the corresponding period of 2022 due to rising demand for this segment.
Wellbore Technologies: Revenues in this segment improved 20.7% to $804 million year over year. The figure beat our projection of $778.1 million.
Adjusted EBITDA of $164 million increased from the year-earlier quarter’s level of $122 million and also beat our estimate of $142.1 million. This was due to improved manufacturing throughput from the segment’s drill pipe operations, market share gains and improving demand from the international market.
Completion & Production Solutions: The segment’s revenues rose 17.8% to $753 million year over year. The top line also beat our projection of $751.5 million.
Adjusted EBITDA of $69 million increased from the year-ago quarter’s level of $32 million, primarily due to an improved product mix of international and offshore projects and better execution of NOV’s manufacturing plans. The figure, however, missed our estimate of $78.1 million.
Backlog
At the end of June 2023, the order backlog for Rig Technologies’ capital equipment was $2.89 billion, including $222 million worth of new orders. The same for the Completion & Production Solutions segment was $1.59 billion, comprising $450 million worth of new orders.
Balance Sheet
As of Jun 30, 2023, NOV had cash and cash equivalents of $592 million and long-term debt of $1.72 billion, with a debt-to-capitalization of 23.8%.
Outlook
The company anticipates that free cash flow will roughly break even in 2023 and exceed 50% of EBITDA in 2024.
It expects a slight revenue decline in the third quarter but a significant increase in the fourth quarter, thanks to a strong backlog and demand from international markets.
NOV expects to boost international and offshore activity to counter U.S. declines. For the Wellbore Technologies segment, it anticipates third-quarter revenues and EBITDA to be in line with the second- quarter level.
For the Completions & Production Solutions segment, the company expects growing demand from improving offshore markets to offset softer conditions in North America, causing third-quarter results to be in line with the second quarter.
Nevertheless, the building momentum in offshore markets is making us optimistic about the segment’s ability to attain low double-digit EBITDA margins by year-end.
The company anticipates a modest decline in XL Conductor Pipe Connection business in the third quarter, but increased shipments in the fourth quarter to support drilling programs.
NOV expects North America land operations to slow down in the third quarter due to higher commodity prices. However, drilling contractor customers are preparing for higher activity in 2024. International and offshore markets are anticipated to overcome North American headwinds with growing activity in West Africa, Asia, the North Sea, offshore Mexico and the Middle East.
Zacks Rank and Key Picks
Currently, NOV carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum (EPM - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Murphy USA (MUSA - Free Report) and NGL Energy Partners (NGL - Free Report) , both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum is worth approximately $307.07 million. EPM currently pays a dividend of 48 cents per share, or 5.20% on an annual basis.
The company currently has a forward P/E ratio of 8.55. In comparison, its industry has an average forward P/E of 13.40, which means EPM is trading at a discount to the group.
Murphy USA is valued at around $6.58 billion. In the past year, its shares have risen 5.8%
MUSA currently pays a dividend of $1.52 per share, or 0.50% on an annual basis. Its payout ratio currently sits at 6% of earnings.
NGL Energy Partners is valued at around $535.63 million. In the past year, its units have risen 149.1%.
The partnership currently has a forward P/E ratio of 4.67. In comparison, its industry has an average forward P/E of 16.20, which means NGL is trading at a discount to the group.