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National Oilwell (NOV) to Post Q2 Earnings: A Beat in Store?

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National Oilwell Varco, Inc. NOV is scheduled to release second-quarter 2018 results on Jul 26 after the closing bell.

Houston, TX-based National Oilwell is a world leader in designing, manufacturing and selling of comprehensive systems, components, products, and equipment used in oil and gas drilling and production worldwide.

In the last reported quarter, the company reported weaker-than-expected results on poor performance especially from the Rig Technologies segment. In the trailing four quarters, the company delivered a negative earnings surprise of 84.38%.

The Zacks Consensus Estimate for earnings stands at 3 cents per share on revenues of $1,991 million. Notably, the Zacks Consensus Estimate for earnings has moved north by a penny over the past two months. This signals a turnaround from a loss of 14 cents per share incurred in the year-ago quarter.

National Oilwell Varco, Inc. Price and EPS Surprise

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

Why a Likely Positive Surprise?

Our proven model shows that National Oilwell is likely to beat earnings estimates in the to-be-reported quarter, as it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +29.63%. This is because the Most Accurate Estimate stands at 4 cents while the Zacks Consensus Estimate is pegged at 3 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: National Oilwell currently holds a Zacks Rank #3. A Zacks Rank #3, when combined with a positive ESP, makes us confident of an earnings beat.

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.

What is Driving the Better-Than-Expected Earnings?

Average West Texas Intermediate (WTI) crude prices for the month of April, May and June 2018 were recorded at $66.25, $69.98 and $67.87 per barrel, respectively, per data from the U.S. Energy Information Administration (EIA). These average prices were considerably higher than the year-ago respective prices of $51.06, $48.48 and $45.18. The energy equipment supplier is likely to realize the benefit of recovering commodity price environment.

During the fourth quarter of 2017, National Oilwell 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 Rig Technologies segment is anticipated to report improved results compared with the prior quarter. Notably, the Zacks Consensus Estimate for operating profit of the Rig Technologies unit is pegged at $37.37 million, higher than $18 million recorded in the first quarter of 2018.

Robust performance from onshore-levered Wellbore Technologies segment is likely to buoy the company’s top line in the quarter to be reported. Moreover, the Zacks Consensus Estimate for Wellbore Technologies’ first-quarter operating profit is pegged at $35 million, indicating a turnaround from a loss of $24 million in the year-ago quarter. This also signals notable improvement from the prior quarter’s profit of $12 million.

The Zacks Consensus Estimate for the Completion & Production Solutions segment’s second-quarter operating profit is pegged at $28.60 million, up from $27 million in the year-ago period and $16 million generated in the last reported quarter.

As such, robust performance from all its segments, along with cost-containment efforts and solid project execution are expected to buoy second-quarter results of the company.

Other Energy Stocks With Favorable Combination

National Oilwell is not the only energy firm poised to deliver earnings beat in the quarter to be reported. Here are some other companies from the energy space, which according to our model also have the right combination of elements to post an earnings beat.

Noble Corporation NE has an Earnings ESP of +0.61% and a Zacks Rank #3. The company is expected to report second-quarter earnings on Aug 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Transocean Limited RIG has an Earnings ESP of +18.16% and a Zacks Rank #3. The company is expected to release second-quarter numbers on Jul 30.

Nabors Industries Limited. NBR has an Earnings ESP of +6.79% and a Zacks Rank #3. The company is expected to post second-quarter results on Aug 1.

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National Oilwell Varco, Inc. (NOV) : Free Stock Analysis Report
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