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What's in Store for National Oilwell's (NOV) Q1 Earnings?

Zacks Equity Research

National Oilwell Varco, Inc. NOV is scheduled to release first-quarter 2019 results on Apr 25, after the closing bell. The current Zacks Consensus Estimate for the quarter to be reported is a loss of 9 cents on revenues of $1.95 billion.

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

In the last reported quarter, the company reported weaker-than-expected results amid lesser-than-expected contribution from the Wellbore Technologies segment. Coming to earnings surprise history, National Oilwell managed to beat estimates in just one out of the trailing four quarters, delivering average negative surprise of 103.13%.

Let’s see which way are top and bottom-line estimates headed this time.

The Zacks Consensus Estimate for first-quarter loss has widened by six cents over the past seven days to 9 cents a share. Nonetheless, it compares favorably with the year-ago reported loss of 18 cents. The Zacks Consensus Estimate for revenues is pegged at $1,950 million, indicating an increase from$1,795 million reported in the prior-year quarter.

Let’s take a look at the factors that are likely to shape National Oilwell’s first-quarter earnings.

National Oilwell Varco, Inc. Price and EPS Surprise

 

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

Factors at Play

The oil crash toward the end of 2018 caught the energy companies off guard, especially the oilfield services players. Weaker demand for oilfield equipment due to low prices persisted in the first quarter of 2019 as well. While oil prices witnessed a rebound of more than 30% in the first quarter, capital discipline undertaken by various energy explorers is likely to affect the performance of oilfield equipment providers like National Oilwell. 

A week ago, the company’s Chairman Clay Williams already warned investors that the firm will likely come up with lower-than-expected results from each of its three segments amid tough operating environment. Notably, adjusted EBITDA from the Wellbore Technologies segment is projected at $129 million, suggesting a decline from the last reported quarter’s $155 million. The Zacks Consensus Estimate for first-quarter 2019 adjusted EBITDA from Rig Technologies and Completion & Production units is pegged at $66 million and $76 million, implying a decrease from the last reported quarter’s $102 million and $112 million, respectively.

Contraction of orders, fewer deliveries of drill pipes and other equipment, and slowdown of activities in both the offshore and North American markets are likely to impact the company’s first-quarter results. Notably, National Oilwell anticipates first-quarter 2019 sales to come in at $1.94 billion, indicating a sequential fall of 26%.The expected figure is a tad lower than the corresponding Zacks Consensus Estimate.

Earnings Whispers

Our proven model does not show that National Oilwell will beat estimates in the to-be-reported quarter. That is because 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 the consensus estimate. That is not the case here as you will see below. 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 -14.07%. This is because the Most Accurate Estimate of loss of 10 cents a share is pegged a penny above than the Zacks Consensus Estimate.

Zacks Rank: National Oilwell currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive Earnings ESP to be sure of a positive surprise.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

Though an earnings beat looks uncertain for National Oilwell, here are a few energy firms from the energy space that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat in the upcoming quarterly release:

Cabot Oil & Gas Corporation COG has an Earnings ESP of +4.43% and a Zacks Rank #1. The firm is expected to release quarterly earnings on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

ConocoPhillips COP has an Earnings ESP of +1.55% and a Zacks Rank #2. The company is anticipated to release first-quarter earnings on Apr 30.

Encana Corporation ECA has an Earnings ESP of +44.83% and a Zacks Rank #3. The company is anticipated to release quarterly earnings on Apr 30.

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