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NOV Q3 Earnings Disappoint, Revenues Increase Year Over Year
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NOV Inc. (NOV - Free Report) reported a third-quarter 2023 adjusted profit of 29 cents per share, which missed the Zacks Consensus Estimate of 35 cents. The underperformance can be attributed to higher expenses in the form of provision for income taxes in the reported quarter.
However, the bottom line improved from the year-ago quarter’s level of 8 cents due to improving execution, customer demand and pricing.
NOV’s total revenues of $2.19 billion surpassed the Zacks Consensus Estimate by 2.8% and rose 16.5% from the year-ago quarter’s figure of $1.88 billion. This was primarily due to better-than-expected performance of the company’s major segments.
Rig Technologies: The unit reported second-quarter revenues of $686 million, which beat our projection of $636.4million. The top line also exceeded the prior-year quarter’s reported figure of $511 million.
Adjusted EBITDA of $100 million beat our estimate of $94.9 million. The actuals improved from $52 million recorded in the corresponding period of 2022, due to improved execution and spare part shipments from NOV’s aftermarket operations.
Wellbore Technologies: Revenues at this segment improved 7.8% year over year to $799 million. However, the figure missed our projection of $802.6 million.
Adjusted EBITDA of $166 million increased from the year-earlier quarter’s level of $145 million and also beat our estimate of $163.7 million. This was a result of enhanced manufacturing efficiency in the segment's drill pipe operations, as well as improvements in the international and offshore markets.
Completion & Production Solutions: The segment’s revenues rose 11.6% to $760 million year over year. The top line also beat our projection of $752.7 million.
Adjusted EBITDA of $67 million increased from the year-ago quarter’s level of $56 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 $68.8 million.
Backlog
At the end of September 2023, NOV’s capital equipment order backlog for Rig Technologies totaled $2.97 billion, including $178 million worth of new orders.
The company’s Completion & Production Solutions operations currently have a $1.63-billion backlog, including new orders worth $530 million.
Balance Sheet
As of Sep 30, 2023, the company had cash and cash equivalents of $513 million and long-term debt of $1.73 billion, with a debt-to-capitalization of 23.6%.
Outlook
For the fourth quarter, NOV anticipates working capital to improve, leading to healthy free cash flow. The Wellbore Technologies segment is expected to grow 46%, with incremental margins in the low to mid-20% range. The Completion & Production Solutions and the Rig Technologies segments are expected to grow 2-4% (sequentially) and 1-3%, respectively, with EBITDA flow-through in the low to mid-30% range during the fourth quarter.
NOV expects revenues to increase between 1% to 3%, with EBITDA flow-through in the low to mid-30% range for the same quarter.
The company expects a modest rebound in U.S. land activity and double-digit international growth in 2024.
CVR Energy is valued at $3.12 billion. In the past year, its shares have lost 19.6%.
CVI currently pays a dividend of $2 per share or 6.45% on an annual basis. Its payout ratio currently sits at 30% of earnings.
USA Compression Partners is valued at around $2.44 billion. USAC currently pays a dividend of $2.10 per unit, or 8.47% on an annual basis.
USAC provides natural gas compression services and offers compression services to oil companies and independent producers, processors, gatherers, and transporters of natural gas and crude oil. It also operates stations.
Harbour Energy is worth approximately $2.28 billion. HBRIY currently pays a dividend of 21 cents per share, or 6.76% on an annual basis.
The company's activities include acquiring, exploring, developing, and producing oil and gas reserves. It has ownership stakes in several properties in the United Kingdom, Norway, Indonesia, Vietnam and Mexico.
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NOV Q3 Earnings Disappoint, Revenues Increase Year Over Year
NOV Inc. (NOV - Free Report) reported a third-quarter 2023 adjusted profit of 29 cents per share, which missed the Zacks Consensus Estimate of 35 cents. The underperformance can be attributed to higher expenses in the form of provision for income taxes in the reported quarter.
However, the bottom line improved from the year-ago quarter’s level of 8 cents due to improving execution, customer demand and pricing.
NOV’s total revenues of $2.19 billion surpassed the Zacks Consensus Estimate by 2.8% and rose 16.5% from the year-ago quarter’s figure of $1.88 billion. This was primarily due to better-than-expected performance of the company’s major segments.
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 $686 million, which beat our projection of $636.4million. The top line also exceeded the prior-year quarter’s reported figure of $511 million.
Adjusted EBITDA of $100 million beat our estimate of $94.9 million. The actuals improved from $52 million recorded in the corresponding period of 2022, due to improved execution and spare part shipments from NOV’s aftermarket operations.
Wellbore Technologies: Revenues at this segment improved 7.8% year over year to $799 million. However, the figure missed our projection of $802.6 million.
Adjusted EBITDA of $166 million increased from the year-earlier quarter’s level of $145 million and also beat our estimate of $163.7 million. This was a result of enhanced manufacturing efficiency in the segment's drill pipe operations, as well as improvements in the international and offshore markets.
Completion & Production Solutions: The segment’s revenues rose 11.6% to $760 million year over year. The top line also beat our projection of $752.7 million.
Adjusted EBITDA of $67 million increased from the year-ago quarter’s level of $56 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 $68.8 million.
Backlog
At the end of September 2023, NOV’s capital equipment order backlog for Rig Technologies totaled $2.97 billion, including $178 million worth of new orders.
The company’s Completion & Production Solutions operations currently have a $1.63-billion backlog, including new orders worth $530 million.
Balance Sheet
As of Sep 30, 2023, the company had cash and cash equivalents of $513 million and long-term debt of $1.73 billion, with a debt-to-capitalization of 23.6%.
Outlook
For the fourth quarter, NOV anticipates working capital to improve, leading to healthy free cash flow. The Wellbore Technologies segment is expected to grow 46%, with incremental margins in the low to mid-20% range. The Completion & Production Solutions and the Rig Technologies segments are expected to grow 2-4% (sequentially) and 1-3%, respectively, with EBITDA flow-through in the low to mid-30% range during the fourth quarter.
NOV expects revenues to increase between 1% to 3%, with EBITDA flow-through in the low to mid-30% range for the same quarter.
The company expects a modest rebound in U.S. land activity and double-digit international growth in 2024.
Zacks Rank and Key Picks
Currently, NOV carries a Zacks Rank #3 (Hold).
Investors interested in the energy sector might look at some better-ranked stocks like CVR Energy (CVI - Free Report) and USA Compression Partners (USAC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), and Harbour Energy (HBRIY - Free Report) , carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CVR Energy is valued at $3.12 billion. In the past year, its shares have lost 19.6%.
CVI currently pays a dividend of $2 per share or 6.45% on an annual basis. Its payout ratio currently sits at 30% of earnings.
USA Compression Partners is valued at around $2.44 billion. USAC currently pays a dividend of $2.10 per unit, or 8.47% on an annual basis.
USAC provides natural gas compression services and offers compression services to oil companies and independent producers, processors, gatherers, and transporters of natural gas and crude oil. It also operates stations.
Harbour Energy is worth approximately $2.28 billion. HBRIY currently pays a dividend of 21 cents per share, or 6.76% on an annual basis.
The company's activities include acquiring, exploring, developing, and producing oil and gas reserves. It has ownership stakes in several properties in the United Kingdom, Norway, Indonesia, Vietnam and Mexico.