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National Oilwell (NOV) Q2 Loss in Line, Revenues Miss Mark

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Energy equipment maker National Oilwell Varco Inc. (NOV - Free Report) reported second-quarter 2017 loss per share (excluding one-time items) of 14 cents which was in line with the Zacks Consensus Estimate. However, the bottom line compared favorably with the year-ago quarter adjusted loss of 30 cents.

Aggressive cost cutting-initiatives and improved efficiencies along with an uptick of activities in the North American land market led to better results

Second-quarter revenues of $1,759 million increased from $1,724 million a year ago but narrowly missed the Zacks Consensus Estimate of $1,760 million.

National Oilwell Varco, Inc. Price, Consensus and EPS Surprise

 

Segmental Performance

Rig Systems: Revenues came in at $346 million, down 39% from the year-ago quarter. Moreover, the unit incurred an operating loss of $7 million as against a profit of $7 million in the year ago quarter. Declining backlog and suspension of capital equipment deliveries to the third quarter dampened results, which were partly offset by cost cuts.

Rig Aftermarket: The segment generated revenues of $341 million, down 6.3% from the year-ago period. However, operating profit increased 22.5% from the second quarter of 2016 to $76 million. Increased focus on efficiency and favorable mix of products drove the operating margin.

Wellbore Technologies: The segment’s revenues were up 20.2% year over year to $614 million. Further, the unit’s operating loss narrowed by 83.5% to $24 million during second-quarter 2017. Rising momentum in the U.S. markets and modest improvement in international markets along with increased consumer demand for the segment’s products/services led to the improved results.

Completion & Production Solutions: Revenues for the segment were recorded at $652 million, up 21.2% from $538 million in the year-ago quarter. The unit recorded operating profit of $27 million, turning around from an operating loss of $33 million in the corresponding period last year. Improvements in the segment’s land-oriented operations resulted in increased revenues. Strong execution of projects and cost containment efforts led to the operating profit.

Costs & Expenses

Adjusted selling, general, and administrative expenses declined to $293 million (or 4%) in the quarter from the year-ago period figure of $305 million.

Backlog

Capital equipment orders’ backlog for Rig Systems was $2.22 billion as of Jun 30, 2017, including $124 million in new orders during the second quarter.

Moreover, Completion & Production Solutions segment reported a backlog of $881 million in capital equipment order at the end of the second quarter. The figure included $501 million in new orders.

Balance Sheet

As of Jun 30, the company had cash and cash equivalents of $1,530 million and long-term debt of $2,708 million. The debt-to-capitalization ratio was approximately 16.2%.

Zacks Rank & Key Picks

Houston, TX-based National Oilwell is a world leader in the designing, manufacturing and selling of comprehensive systems, components, products, and equipment used in oil and gas drilling and production worldwide. The company carries a Zacks Rank #4 (Sell).

Some better-ranked players from the broader energy space include Braskem S.A. (BAK - Free Report) , Petróleo Brasileiro S.A. or Petrobras (PBR - Free Report) and SeaDrill Limited (SDRL - Free Report) . While Braskem and Petrobras sport a Zacks Rank #1 (Strong Buy), SeaDrill carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Braskem reported an average positive earnings surprise of 107.79% in the trailing four quarters.

Petrobras delivered an average positive earnings surprise of 59.58% in the last four quarters.

SeaDrill reported an average positive earnings surprise of 97.13% in the last four quarters.

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