U.S. Markets closed

National Oilwell Varco (NOV) Q3 Earnings Miss, Rise Y/Y

Nilanjan Choudhury
1 / 2

National Oilwell Varco (NOV) Q3 Earnings Miss, Rise Y/Y

National Oilwell Varco's (NOV) bottom line witnessed a solid rebound from the year-ago quarter's loss on robust results from its Rig Technologies segment.

National Oilwell Varco, Inc. NOV reported break-even earnings in third-quarter 2018 versus the Zacks Consensus Estimate of 12 cents. Weaker-than-expected contribution from the ‘Wellbore Technologies’ and ‘Completion & Production Solutions’ segments led to this underperformance.

As a result of higher steel and labor costs, operating profit from the energy equipment maker’s Wellbore Technologies unit totaled $40 million, below the Zacks Consensus Estimate of $56 million.

Further, operating profit from the Completion & Production Solutions segment came in at $46 million, unable to match the Zacks Consensus Estimate of $55 million. The miss was on account of tepid pressure pumping demand and weak offshore business.

However, National Oilwell Varco’s bottom line witnessed a solid rebound from the year-ago quarter’s loss of 7 cents on the back of robust results from its ‘Rig Technologies’ segment, whose operating profit of $58 million outpaced the Zacks Consensus Estimate by $6 million.

Total revenues of $2,154 million missed the Zacks Consensus Estimate of $2,208 million but rose 17.4% from the year-ago period.

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 $637 million compared with $510 million in the year-ago quarter, reflecting an increase of 24.9%. Fast progress on the construction of new offshore drilling rigs and higher aftermarket sales led to the better performance.

The unit’s adjusted EBITDA was $78 million, 95% higher than $40 million recorded in the year-ago quarter, driven by increase in the orders.

Wellbore Technologies: The segment’s revenues rose 22.2% year over year to $847 million. Strong demand from greater market adoption of the unit’s superior technology services (domestically as well as in the Eastern Hemisphere) drove revenues. 

The unit’s adjusted EBITDA of $135 million also improved from last year’s $94 million, aided by and pricing gains.   

Completion & Production Solutions: Revenues at the segment were $735 million, up 7.8% from $682 million in the year-ago quarter. Robust capital equipment demand for land production drove the upside.

The unit recorded adjusted EBITDA of $99 million, marginally up from the year-ago figure of $97 million due to strong operational execution.

Backlog

Capital equipment order backlog for Rig Technologies was $3.4 billion as of Sep 30, 2018, including $151 million million worth of new orders.

Meanwhile, the Completion & Production Solutions segment reported a backlog of $880 million in capital equipment order at the end of the third quarter. The figure included $372 million of new orders.

Balance Sheet

As of Sep 30, 2018, the company had cash and cash equivalents of $1.3 billion and long-term debt of $2.7 billion. The debt-to-capitalization ratio was 16.2%.

Zacks Rank & Stock Picks

National Oilwell Varco holds a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are oilfield service players Helix Energy Solutions Group, Inc. HLX and Unit Corporation UNT, and energy explorer Magnolia Oil & Gas Corporation MGY. All the companies carry a Zacks Rank #2 (Buy).

(You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.)

The 2018 Zacks Consensus Estimate for Helix Energy is 23 cents, representing some 253.3% earnings per share growth over 2017. Next year’s average forecast is 29 cents, pointing to another 26.5% growth.

The 2018 Zacks Consensus Estimate for Unit Corporation is 83 cents, representing some 53.7% earnings per share growth over 2017. Next year’s average forecast is $1.12, pointing to another 34.3% growth.

Meanwhile, over 30 days, Magnolia Oil & Gas has seen the Zacks Consensus Estimate for 2018 and 2019 increase 13.3% and 12.5%, to $1.70 and $1.80 per share, respectively.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
National Oilwell Varco, Inc. (NOV) : Free Stock Analysis Report
 
Helix Energy Solutions Group, Inc. (HLX) : Free Stock Analysis Report
 
Unit Corporation (UNT) : Free Stock Analysis Report
 
Magnolia Oil & Gas Corp (MGY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research