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Can Improved Price Favor National Oilwell (NOV) Q1 Earnings?

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National Oilwell Varco, Inc. (NOV - Free Report) is set to release first-quarter 2018 results after the closing bell on Apr 26.

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.

Last quarter, the company met the Zacks Consensus Estimate of a loss of 4 cents. In the trailing four quarters, the company witnessed a positive earnings surprise of 6.9%, without missing any estimates. This can be attributed to cost-reduction initiatives and improved efficiencies. This quarter, the company is expected to report a loss of 4 cents as well.

Factors at Play

Prices of oil at the end of January to March quarter of 2018 were $62.73 per barrel, up about 8.4% sequentially and 27.2% from the year-ago period, amid improving demand outlook and OPEC-production cut deal. The energy equipment supplier is likely to realize the benefit of recovering commodity price environment.

In the last reported quarter, the company reconstituted its offshore-focused business segments by combining Rig Systems and Rig Aftermarkets into a single unit named Rig Technologies, to reduce administrative burden of the company, aligning it better with evolving market conditions.

The Zacks Consensus Estimate for the Completion & Production Solutions segment’s first-quarter operating profit is pegged at $26.55 million, up from $8 million in the year-ago period and $19 million in the last reported quarter. Moreover, the Zacks Consensus Estimate for Wellbore Technologies’ first-quarter operating profit is $18.88 million, up from operating loss of $21 million and $57 million sequentially and year over year, respectively.

However, the company recently warned investors that the company's first-quarter 2018 revenues are expected to miss expectations primarily due to declined progress in new offshore rig construction as well as client-associated equipment deferrals. The company expects its revenues to come in at $1.8 billion in the first quarter, reflecting 3.4% year-over-year decline. It is below the Zacks Consensus Estimate of $1.889 billion.

Also, sequential shipments of subsea production equipment declined during the end of the first quarter, which can hurt the company's top line. Moreover, National Oilwell’s adjusted EBITDA is now anticipated to reach about $160 million, down from $197 million sequentially.

What Does Our Model Unveil?

Our proven model does not conclusively show that National Oilwell is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: Earnings ESP represent the difference between the Most Accurate estimate and the Zacks Consensus Estimate. National Oilwell has an ESP of -22.73% as the Most Accurate estimate stands at a loss of 5 cents while the Zacks Consensus Estimate is pegged at a loss of 4 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: National Oilwell carries a Zacks Rank #3. Though a Zacks Rank of #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Energy Stocks with Favorable Combinations

Here are some companies from the energy space which, according to our model, have the right combination of elements to post an earnings beat this quarter.

Frisco, TX-based Comstock Resources, Inc. (CRK - Free Report) has a Zacks Rank #2 with an Earnings ESP of +37.34%. The company will report earnings on May 14.

Houston, TX-based Oil States International, Inc. (OIS - Free Report) has a Zacks Rank #2 and an Earnings ESP of +32.83%. The company will report earnings on Apr 25.

Denver, CO-based Antero Resources Corporation (AR - Free Report) has a Zacks Rank #3 with an Earnings ESP of +7.28%. The company will report earnings on Apr 25.

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