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National Oilwell (NOV) Q2 Earnings & Sales Beat Estimates

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National Oilwell Varco, Inc. NOV reported second-quarter 2018 adjusted earnings of 6 cents per share, surpassing the Zacks Consensus Estimate of 3 cents. Stronger-than-expected contribution from all segments led to this stellar show.

Operating profit from the Rig Technologies segment totaled $62 million, way above the Zacks Consensus Estimate of $37.37 million. Further, operating profit from the Completion & Production Solutions segment came in at $40 million, surpassing the estimate of $28.60 million. Operating profit of $38 million at Wellbore Technologies also topped the Zacks Consensus Estimate of $35 million.

The bottom line also witnessed a solid rebound from the year-ago quarter’s loss of 20 cents on the back of crude pricing strength, increased demand and higher year-over-year revenues from all its segments.

Total revenues of $2,106 million outpaced the Zacks Consensus Estimate of $1,991 million. Revenues also rose 19.7% and 17.3% year over year and sequentially, respectively.

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

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

Segmental Performance

Rig Technologies: Revenues came in at $651 million compared with $546 million in the year-ago quarter, reflecting an increase of 19.2%. Revenues at the segment also rose 34.8% sequentially. Fast progress in new offshore rig construction led to the better performance.

The unit’s adjusted EBITDA was $84 million, 82.6% higher than $46 million recorded in the year-ago quarter. The segment’s EBITDA also surged 86.6% sequentially, driven by increase in the orders.

Wellbore Technologies: The segment’s revenues rose 29.2% year over year to $793 million. Strong demand from greater market adoption of the unit’s superior technology services drove revenues. Revenues from this segment also climbed around 12% sequentially on the back of increased activities in the Eastern Hemisphere.  

Importantly, the unit improved from last year’s adjusted EBITDA of $66 million to $133 million, aided by higher volumes and pricing gains. In addition, the figure came in higher than the prior-quarter’s $103 million.  

Completion & Production Solutions: Revenues at the segment were $738 million, up 13.2% from $652 million in the year-ago quarter. The top line also improved from the prior quarter’s figure of $670 million. Elevated demand for capital equipment in North America, along with increase in deliveries, drove the upside.

The unit recorded adjusted EBITDA of $94 million, marginally down from the year-ago figure of $98 million. However, the reported figure witnessed an increase of 28.7% sequentially.

Backlog

Capital equipment order backlog for Rig Technologies was $3.51 billion as of Jun 30, 2018, including $2.03 billion million worth of new orders. Notably, 88.7% of the new orders were associated with National Oilwell’s JV agreement with Saudi Aramco.

Moreover, the Completion & Production Solutions segment reported a backlog of $995 million in capital equipment order at the end of the second quarter. The figure included $398 million of new orders.

Balance Sheet

As of Jun 30, 2018, the company had cash and cash equivalents of $1,137 million and long-term debt of $2,707 million. The debt-to-capitalization ratio was around 16.2%.

Zacks Rank and Key Picks

Currently, National Oilwell carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are ConocoPhillips COP, China Petroleum and Chemical Corporation SNP, also known as Sinopec, and CVR Refining, LP CVRR, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ConocoPhillips, based in Houston, TX, is a major global exploration and production (E&P) company. It pulled off an impressive average positive earnings surprise of 226.9% over the last four quarters.

Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an outstanding average positive earnings surprise of 492.8% over the trailing four quarters.

Sugar Land, TX-based CVR Refining is an independent downstream energy partnership with refining and associated logistics properties in the Midcontinent United States. The company delivered an average positive earnings surprise of 7.05% in the preceding four quarters.

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