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Why Is National Oilwell (NOV) Up 9.5% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for National Oilwell Varco, Inc. (NOV - Free Report) . Shares have added about 9.5% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is NOV due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

First-Quarter 2018 Results

National Oilwell Varco reported first-quarter 2018 adjusted loss of 18 cents per share, much wider than the Zacks Consensus Estimate of a loss of 4 cents. Lower contribution from all segments led to the poor show. Operating profit from the Rig Technologies segment totaled $18 million, way below the Zacks Consensus Estimate of $34.81 million. Further, operating profit from the Completion & Production Solutions segment was $16 million, lagging the estimate of $26.55 million. Operating profit of $12 million at Wellbore Technologies also fell shy of the Zacks Consensus Estimate of $18.88 million.

The bottom line also compared unfavorably with the last report’s loss of 4 cents. On the bright side, loss per share narrowed 43.7% from the first quarter of 2017. The year-over-year improvement was led by robust performance by the onshore-levered Wellbore Technologies segment.

Total revenues of $1,795 million missed the Zacks Consensus Estimate of $1,853 million. Revenues also declined 8.8% sequentially. However, the top line improved nominally from the year-ago $1,741 million.

Segmental Performance

Rig Technologies: Revenues came in at $483 million compared with $582 million in the year-ago quarter, reflecting a decline of 17%. Revenues at the segment also declined 21.3% sequentially. Slowdown in new offshore rig construction led to the weak performance.

The unit’s adjusted EBITDA was $45 million, slightly lower than $47 million recorded in the year-ago quarter. The segment’s EBITDA fell 35.7% sequentially, affected by low orders.

Wellbore Technologies: The segment’s revenues rose 28.1% year over year to $711 million. Strong demand from greater market adoption of the unit’s superior technology services drove revenues. However, revenues showed a marginal drop from $715 million recorded in the prior quarter owing to reduced activities in the Eastern Hemisphere, partly offset by robust growth in the Western Hemisphere.

Importantly, the unit improved significantly from last year’s adjusted EBITDA of $38 million to $103 million on the back of higher volumes and pricing gains. However, the figure was lower than the prior-quarter’s $107 million.  

Completion & Production Solutions: Revenues at the segment were $670 million, up from $648 million in the year-ago quarter. However, the top line was lower than $690 million in the last report due to client associated equipment deferrals.

The unit recorded adjusted EBITDA of $73 million, down from $77 million and $74 million in the year-ago quarter and prior quarter, respectively.

Backlog

Capital equipment order backlog for Rig Technologies was $2,050 million as of Mar 31, 2018, including $201 million worth of new orders.

Moreover, the Completion & Production Solutions segment reported a backlog of $1,010 million in capital equipment order at the end of the first quarter. The figure included $324 million of new orders.

Balance Sheet

As of Mar 31, 2018, the company had cash and cash equivalents of $1,236 million and long-term debt of $2,707 million. The debt-to-capitalization ratio was around 16.1%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to four lower. In the past month, the consensus estimate has shifted by 31.2% due to these changes.

VGM Scores

At this time, NOV has a poor Growth Score of F, however its Momentum is doing a bit better with a D. Following the exact same course, the stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, NOV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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