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What Lies Ahead for National Oilwell (NOV) in Q4 Earnings?

Zacks Equity Research

National Oilwell Varco, Inc. NOV is set to release fourth-quarter 2019 earnings results on Thursday Feb 6, after market closes.

The current Zacks Consensus Estimate for the to-be-reported quarter is pegged at earnings of 16 cents per share on expected revenues of $2.10 billion. There has been no change in estimates for the bottom line over the past 60 days.

Let’s delve into the factors that might have impacted the company’s performance in the December quarter.

Factors at Play

The backlog orders in the Completion & Production Solutions are likely to have increased in the fourth quarter owing to the year-over-year rise in drilling rig activities at the international and U.S. offshore resources. Such improvements in the drilling activities are expected to have mitigated the deteriorating market conditions in the U.S. completion markets, per the company.

The Zacks Consensus Estimate for fourth-quarter backlog orders from the Completion & Production units is pegged at $500 million, indicating an increase of 9.65% from the year-ago reported figure of $456 million.

However, the consensus mark for backlog orders from the Rig Technology unit stands at $300 million, implying a 25.5% drop from the year-ago reported number of $403 million. Meanwhile, National Oilwell expects EBITDA margins from the unit to be weak, primarily due to unfavourable business mix and delayed project closures. Evidently, the Zacks Consensus Estimate for fourth-quarter adjusted EBITDA from the Rig Technology unit is pegged at $89 million, suggesting a 12.75% fall from the year-ago reported figure of $102 million.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for National Oilwell this time around. 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. But that’s not the case here.

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 -2.87%.

Zacks Rank: National Oilwell carries a Zacks Rank #3.

The above combination acts as a spoiler as it leaves surprise prediction inconclusive.

Highlights of Q3 Earnings & Surprise History

In the last reported quarter, National Oilwell incurred an adjusted loss of 61 cents per share in third-quarter 2019, declining from the Zacks Consensus Estimate for earnings of 10 cents. The bottom line also worsened from the year-ago quarter’s break-even as North American drillers scale back their production growth plans, leaving less scope of work for the likes of National Oilwell Varco. Particularly, weaker-than-expected revenue contributions from the Rig Technologies and the Wellbore Technologies segments caused this underperformance.

Moreover, total revenues of $2.13 billion lagged the Zacks Consensus Estimate of $2.17 billion and also dipped 0.9% from the year-ago period.

As far as the earnings surprise track is concerned, this Houston, TX-based company’s bottom line missed the Zacks Consensus Estimate in three of the trailing four quarters, the average negative surprise being 212.97%. This is depicted in the graph below:

National Oilwell Varco, Inc. Price and EPS Surprise

National Oilwell Varco, Inc. Price and EPS Surprise
National Oilwell Varco, Inc. Price and EPS Surprise

National Oilwell Varco, Inc. price-eps-surprise | National Oilwell Varco, Inc. Quote

Stocks to Consider

Here are some stocks worth considering from the energy space, which per our model have the right combination of elements to beat on earnings this reporting cycle:

NuStar Energy L.P. NS has an Earnings ESP of +1.32% and a Zacks Rank #2. The company is slated to report fourth-quarter earnings on Feb 5.

Paterson-UTI Energy, Inc. PTEN has an Earnings ESP of +1.30% and a Zacks Rank of 3. The company is slated to announce fourth-quarter 2019 earnings on Feb 6.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +11.57% and is Zacks #3 Ranked. The partnership is slated to release fourth-quarter earnings on Feb 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Plains All American Pipeline, L.P. (PAA) : Free Stock Analysis Report
 
NuStar Energy L.P. (NS) : Free Stock Analysis Report
 
National Oilwell Varco, Inc. (NOV) : Free Stock Analysis Report
 
Patterson-UTI Energy, Inc. (PTEN) : Free Stock Analysis Report
 
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