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Is a Beat Likely for National Oilwell This Earnings Season?

Zacks Equity Research

We expect National Oilwell Varco, Inc. NOV to beat on earnings when it reports third-quarter 2019 results, after the closing bell on Monday Oct 28.

The current Zacks Consensus Estimate for earnings is pegged at 10 cents per share on revenues of $2,167 million.

Let’s delve deeper and find out the factors likely to impact the to-be-reported results.

Factors Likely to Drive Better-Than-Expected Results

The backlog orders in the Completion & Production Solutions as well as Rig Technology segments are likely to have increased in the third quarter as a result of the year-over-year rise in drilling rig activities in the U.S. offshore resources. In particular, these orders are expected to have boosted the Completion & Production Solutions unit’s top line by 8-9%, according to the company.

The Zacks Consensus Estimate for third-quarter backlog orders from the Completion & Production and Rig Technology units is pegged at $500 million and $300 million, respectively, indicating an increase from the year-ago reported figures of $439 million and $256 million each.

In the second quarter, offshore sales improved from the year-ago period. This trend most likely continued in the third quarter because of healthy customer demand. Evidently, the Zacks Consensus Estimate for third-quarter adjusted EBITDA from the Rig Technology unit is pegged at $80 million, suggesting a 2.56% rise from the year-ago reported figure of $78 million.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for National Oilwell this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: National Oilwell has an Earnings ESP of +16.00%.

Zacks Rank: National Oilwell currently has a Zacks Rank #3, which increases the predictive power of ESP.

Highlights of Q2 Earnings & Surprise History

In the quarter ending June, National Oilwell — a world leader in designing, manufacturing, and selling of comprehensive systems, components, products plus equipment used in oil and gas drilling and production worldwide — delivered narrower-than-expected loss.

However, the company’s bottom line fell from the year-ago quarter’s earnings of 6 cents as North American drillers scale back their production growth plans, leaving less work for the likes of National Oilwell.

Further, adjusted EBITDA from the Completion & Production Solutions segment came in at $52 million, in line with the Zacks Consensus Estimate. The unit benefited from higher offshore and international demand for equipment regarding completion and production.

As far as earnings surprises are concerned, this Houston-based company’s earnings missed the Zacks Consensus Estimate in three of the trailing four quarters, the average negative surprise being 60.47%. This is depicted in the graph below:

National Oilwell Varco, Inc. Price

National Oilwell Varco, Inc. Price

National Oilwell Varco, Inc. price | National Oilwell Varco, Inc. Quote

Other Stocks to Consider

Apart from National Oilwell, here are some other stocks worth considering from the energy space with the right combination of elements to also beat on earnings in the upcoming quarterly reports:

The Williams Companies, Inc. WMB has an Earnings ESP of +1.63% and a Zacks Rank of 3. This energy infrastructure provider is scheduled to release earnings on Oct 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Patterson-UTI Energy, Inc. PTEN has an Earnings ESP of +0.38% and is Zacks #3 Ranked. The oilfield service provider is set to release earnings on Oct 24.

Gulfport Energy Corporation GPOR has an Earnings ESP of +3.40% and is a #3 Ranked stock. This Oklahoma-based company engaged in the acquisition, exploration, development and production of oil and natural gas properties in the United States is scheduled to release earnings on Oct 31.

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