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NOV Stock Drops 19% in the Past Six Months: Time to Hold or Exit?
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Key Takeaways
Backlog in Energy Equipment fell to $4.30B, with new orders dropping to $420M in Q2.
Planned $100M cost cuts face headwinds from inflation and tariffs, delaying full benefits.
Aftermarket demand fell sharply, while North America's drilling activity weakened further.
NOV Inc. (NOV - Free Report) is a global leader in the delivery of cutting-edge equipment and technology for the oilfield and energy industries. With a long-standing presence across both conventional and renewable energy markets, the company has built a reputation for innovation and reliability. Yet, despite this solid foundation, its share price has dropped 19.1% over the past six months, prompting renewed scrutiny from investors.
Although Houston, TX-based oil and gas equipment and services company continues to play a critical role in supporting global energy infrastructure, recent financial setbacks and broader economic uncertainties have cast doubt on its short-term prospects. Disappointing earnings, increasing operational costs and shrinking margins have intensified pressure on the stock, leading many to question whether the current dip indicates a momentary dip or signals more systemic issues.
Let us explore NOV’s recent financial trajectory, highlight ongoing risks and evaluate the growth opportunities to help investors assess whether holding the stock still makes sense or if it is time to reassess their position.
NOV's Disappointing Performance in Q2
The oilfield services and equipment provider posted adjusted earnings of 29 cents per share for the second quarter of 2025, missing the Zacks Consensus Estimate of 30 cents. Margin pressures within the Energy Equipment segment played a key role in driving the company's underperformance.
Headwinds Affecting NOV’s Growth
Lower Aftermarket Spare Parts Demand: Aftermarket spare parts bookings fell sharply in the second quarter of 2025, particularly in the Drilling Equipment business, due to global trade uncertainty and lower oil prices. NOV does not expect this level of demand to rebound soon, estimating a mid-teen decline in aftermarket revenues for the full year. This is concerning because aftermarket sales typically provide higher margins and stable cash flow. Unlike Solaris Energy Infrastructure (SEI - Free Report) and Oil States International, Inc. (OIS - Free Report) , which have more service-based business models that help cushion volatility, NOV remains highly exposed to drilling-related capital cycles.
Weakness in North America’s Markets: North America’s market, particularly for oil-directed drilling, has softened significantly, with the U.S. rig count declining roughly 9% since March 2025. NOV noted that customers are curtailing short-cycle activity and cannibalizing stacked equipment for spare parts, delaying new capital expenditures. This trend is likely to persist through the second half of 2025, further dampening revenues and margins in the Energy Products and Services segment.
Delayed Offshore Projects: While NOV remains optimistic about offshore activity in 2026, near-term delays in final investment decisions for floating production storage and offloading projects are impacting orders. Supply-chain constraints, inflation and macroeconomic uncertainty have caused customers to push projects to the right, reducing near-term revenue visibility. This delay is evident in the Energy Equipment segment's book-to-bill ratio of 66 for the second quarter of 2025. By contrast, Solaris Energy Infrastructure's asset-light approach and focus on midstream logistics projects give it more resilience amid project deferrals.
Mixed International Performance: International markets like Saudi Arabia and Latin America are experiencing slowdowns, with the former suspending additional onshore rigs and Argentina shifting focus from conventional to unconventional plays. While NOV sees long-term potential in these regions, near-term revenue declines and repositioning costs (e.g., charges in Latin America) are weighing on results. Oil States International has also faced challenges in international markets, but the diversified exposure across completion services has helped it partially offset volatility in drilling activity.
Higher Working Capital Requirements: NOV posted working capital as a percentage of revenues at 30% in the second quarter of 2025, a 300-basis-point improvement year over year. However, the company expects full-year working capital to remain elevated at 27-29% of revenues, which could limit free cash flow conversion. This indicates ongoing inefficiencies in inventory and receivables management.
Uncertainty Around Cost-Saving Initiatives: NOV plans to cut $100 million in annual costs by the end of 2026 through business consolidations, strategic sourcing and process improvements. However, these savings may be offset by rising tariffs and inflation, and the full benefits may not materialize until late 2026. Investors may question whether these measures will be enough to stabilize margins in the near term.
Declining Backlog for Energy Equipment: The Energy Equipment segment's backlog decreased $31 million year over year to $4.30 billion as of June 30, 2025. New orders totaled only $420 million in the second quarter, down sharply from $977 million in the prior year. This decline raises concerns about revenue growth, especially if project delays persist.
Competitive Pricing Pressures: NOV noted increasing price competition in its markets, with competitors using concessions to win back market share. This, combined with higher product costs due to tariffs, could further squeeze margins, particularly in the Energy Products and Services segment.
Dividend and Share Buyback Pressures: While NOV returned $176 million to shareholders in the second quarter of 2025 through dividends and buybacks, its ability to sustain this level of capital return is uncertain, given declining profitability and free cash flow. The company may need to prioritize debt reduction or operational investments over shareholder returns in the coming quarters.
NOV Underperforms Oil Sector and Peers: NOV significantly underperformed compared with its peers and the broader Zacks Oil and Energy sector over the past six months. Its 19.1% decline was steeper than Oil States International’s 5.4%, Solaris Energy Infrastructure’s 8.7% and USA Compression Partners’ (USAC - Free Report) 15.1%. While the stock’s performance was slightly better than the Mechanical and Equipment Oil and Gas sub-industry’s decline of 19.4%, it considerably underperformed the overall Zacks Oil and Energy sector, which experienced only a modest decrease of 3.4%.
6-Month Share Price Performance Comparison
Image Source: Zacks Investment Research
Final Verdict: Reasons to Avoid NOV Stock for Now
This Zacks Rank #5 (Strong Sell) company faces multiple headwinds that undermine its near-term outlook, including a sharp decline in aftermarket spare parts demand and persistent weakness in North America’s drilling market. Offshore project delays and a shrinking backlog in the Energy Equipment segment are reducing visibility into future revenues. International markets are also seeing mixed results, while elevated working capital needs and uncertain cost-saving measures may limit free cash flow and margin recovery. Competitive pricing pressure and declining shareholder returns further add to investor concerns.
Given these challenges and NOV’s underperformance relative to peers, investors may find better risk-adjusted opportunities elsewhere.
Image: Shutterstock
NOV Stock Drops 19% in the Past Six Months: Time to Hold or Exit?
Key Takeaways
NOV Inc. (NOV - Free Report) is a global leader in the delivery of cutting-edge equipment and technology for the oilfield and energy industries. With a long-standing presence across both conventional and renewable energy markets, the company has built a reputation for innovation and reliability. Yet, despite this solid foundation, its share price has dropped 19.1% over the past six months, prompting renewed scrutiny from investors.
Although Houston, TX-based oil and gas equipment and services company continues to play a critical role in supporting global energy infrastructure, recent financial setbacks and broader economic uncertainties have cast doubt on its short-term prospects. Disappointing earnings, increasing operational costs and shrinking margins have intensified pressure on the stock, leading many to question whether the current dip indicates a momentary dip or signals more systemic issues.
Let us explore NOV’s recent financial trajectory, highlight ongoing risks and evaluate the growth opportunities to help investors assess whether holding the stock still makes sense or if it is time to reassess their position.
NOV's Disappointing Performance in Q2
The oilfield services and equipment provider posted adjusted earnings of 29 cents per share for the second quarter of 2025, missing the Zacks Consensus Estimate of 30 cents. Margin pressures within the Energy Equipment segment played a key role in driving the company's underperformance.
Headwinds Affecting NOV’s Growth
Lower Aftermarket Spare Parts Demand: Aftermarket spare parts bookings fell sharply in the second quarter of 2025, particularly in the Drilling Equipment business, due to global trade uncertainty and lower oil prices. NOV does not expect this level of demand to rebound soon, estimating a mid-teen decline in aftermarket revenues for the full year. This is concerning because aftermarket sales typically provide higher margins and stable cash flow. Unlike Solaris Energy Infrastructure (SEI - Free Report) and Oil States International, Inc. (OIS - Free Report) , which have more service-based business models that help cushion volatility, NOV remains highly exposed to drilling-related capital cycles.
Weakness in North America’s Markets: North America’s market, particularly for oil-directed drilling, has softened significantly, with the U.S. rig count declining roughly 9% since March 2025. NOV noted that customers are curtailing short-cycle activity and cannibalizing stacked equipment for spare parts, delaying new capital expenditures. This trend is likely to persist through the second half of 2025, further dampening revenues and margins in the Energy Products and Services segment.
Delayed Offshore Projects: While NOV remains optimistic about offshore activity in 2026, near-term delays in final investment decisions for floating production storage and offloading projects are impacting orders. Supply-chain constraints, inflation and macroeconomic uncertainty have caused customers to push projects to the right, reducing near-term revenue visibility. This delay is evident in the Energy Equipment segment's book-to-bill ratio of 66 for the second quarter of 2025. By contrast, Solaris Energy Infrastructure's asset-light approach and focus on midstream logistics projects give it more resilience amid project deferrals.
Mixed International Performance: International markets like Saudi Arabia and Latin America are experiencing slowdowns, with the former suspending additional onshore rigs and Argentina shifting focus from conventional to unconventional plays. While NOV sees long-term potential in these regions, near-term revenue declines and repositioning costs (e.g., charges in Latin America) are weighing on results. Oil States International has also faced challenges in international markets, but the diversified exposure across completion services has helped it partially offset volatility in drilling activity.
Higher Working Capital Requirements: NOV posted working capital as a percentage of revenues at 30% in the second quarter of 2025, a 300-basis-point improvement year over year. However, the company expects full-year working capital to remain elevated at 27-29% of revenues, which could limit free cash flow conversion. This indicates ongoing inefficiencies in inventory and receivables management.
Uncertainty Around Cost-Saving Initiatives: NOV plans to cut $100 million in annual costs by the end of 2026 through business consolidations, strategic sourcing and process improvements. However, these savings may be offset by rising tariffs and inflation, and the full benefits may not materialize until late 2026. Investors may question whether these measures will be enough to stabilize margins in the near term.
Declining Backlog for Energy Equipment: The Energy Equipment segment's backlog decreased $31 million year over year to $4.30 billion as of June 30, 2025. New orders totaled only $420 million in the second quarter, down sharply from $977 million in the prior year. This decline raises concerns about revenue growth, especially if project delays persist.
Competitive Pricing Pressures: NOV noted increasing price competition in its markets, with competitors using concessions to win back market share. This, combined with higher product costs due to tariffs, could further squeeze margins, particularly in the Energy Products and Services segment.
Dividend and Share Buyback Pressures: While NOV returned $176 million to shareholders in the second quarter of 2025 through dividends and buybacks, its ability to sustain this level of capital return is uncertain, given declining profitability and free cash flow. The company may need to prioritize debt reduction or operational investments over shareholder returns in the coming quarters.
NOV Underperforms Oil Sector and Peers: NOV significantly underperformed compared with its peers and the broader Zacks Oil and Energy sector over the past six months. Its 19.1% decline was steeper than Oil States International’s 5.4%, Solaris Energy Infrastructure’s 8.7% and USA Compression Partners’ (USAC - Free Report) 15.1%. While the stock’s performance was slightly better than the Mechanical and Equipment Oil and Gas sub-industry’s decline of 19.4%, it considerably underperformed the overall Zacks Oil and Energy sector, which experienced only a modest decrease of 3.4%.
6-Month Share Price Performance Comparison
Image Source: Zacks Investment Research
Final Verdict: Reasons to Avoid NOV Stock for Now
This Zacks Rank #5 (Strong Sell) company faces multiple headwinds that undermine its near-term outlook, including a sharp decline in aftermarket spare parts demand and persistent weakness in North America’s drilling market. Offshore project delays and a shrinking backlog in the Energy Equipment segment are reducing visibility into future revenues. International markets are also seeing mixed results, while elevated working capital needs and uncertain cost-saving measures may limit free cash flow and margin recovery. Competitive pricing pressure and declining shareholder returns further add to investor concerns.
Given these challenges and NOV’s underperformance relative to peers, investors may find better risk-adjusted opportunities elsewhere.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.