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Earnings Preview: National Oilwell Varco

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Global large-cap energy equipment maker National Oilwell Varco Inc. (NOV - Free Report) is set to release its fourth-quarter 2012 results before the opening bell tomorrow, Friday, Feb 1.

In the last quarter, it delivered a positive 0.66% earnings surprise, helped by robust activity levels, as well as good project execution skills. This represented the six straight quarter of positive earnings surprise. Let’s see how things are shaping up prior to this announcement.    

Factors to Consider This Quarter

Demand for offshore drilling is again growing rapidly, all around the world. National Oilwell is ready to grasp this opportunity by building new rigs and also by upgrading the older rigs to up-to-date standards and technology.

However, the company derives the major portion of its revenue from onshore projects, which are prone to geopolitical disturbances and might result in order delays and cancellations.

Unlike the third quarter, activities of this energy equipment maker during the final quarter of the year were not enough to win analysts’ confidence.

Earnings Whispers

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

Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.43 while the Zacks Consensus is higher at $1.44. This results in a difference of -0.69%.

Zacks Rank #3 (Hold): National Oilwell’s Zacks Rank #3 (Hold), however, increases the predictive power of ESP. That said we also need to have a positive ESP to be confident of an earnings surprise call.

Other Stocks to Consider

Here are some other companies you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

Atlas Energy L.P , Earnings ESP of +260.00% and Zacks Rank #1 (Strong Buy).  

Northern Tier Energy LP , Earnings ESP of +7.97% and Zacks Rank #1 (Strong Buy). 

Hercules Offshore Inc. , Earnings ESP of +14.29% and Zacks Rank #2 (Buy).

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