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National Oilwell (NOV) Q1 Earnings Beat Estimates, Rise Y/Y

Zacks Equity Research

National Oilwell Varco, Inc. NOV delivered adjusted earnings of 14 cents per share in first-quarter 2020, beating the Zacks Consensus Estimate of 10 cents. Moreover, the bottom line rebounded from the year-ago loss of 20 cents per share. Particularly, strong contribution from the Completion & Production Solutions segment led to this outperformance.

Total revenues of $1.88 billion underperformed the Zacks Consensus Estimate of $1.98 billion and also dipped 2.9% from the year-ago number of $1.94 billion due to weakness in the Wellbore Technologies unit.

Segmental Performance

Rig Technologies: Revenues of $557 million from this segment missed the Zacks Consensus Estimate of $664 million as well as declined from the year-ago quarter’s $603 million, thanks to a drop in capital equipment sales and waning aftermarket revenues, resulting from coronavirus-induced woes. The unit’s adjusted EBITDA of $56 million was in line with the year-earlier quarter’s figure.

Wellbore Technologies: Segmental revenues matched the Zacks Consensus Estimate but fell 14% year over year to $691 million as a result of reduced drilling operations in North America and seasonality in international markets. Moreover, the unit’s adjusted EBITDA of $103 million decreased from the prior-year’s $117 million.

Completion & Production Solutions: Revenues of $675 million were up 16% from $581 million in the year-earlier quarter as offshore and international demand remained solid. The unit recorded adjusted EBITDA of $71million, 153.6% higher than the year-ago figure of $28 million.

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

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

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

Backlog

Capital equipment order backlog for Rig Technologies was $2.93 billion as of Mar 31, 2020 including $146 million worth of new orders.

Meanwhile, the Completion & Production Solutions’ backlog for capital equipment orders totalled $1.19 billion at the end of the first quarter. The figure included $335 million worth of new orders.

Balance Sheet

As of Mar 31, 2020, the company had cash and cash equivalents worth $1.11 billion and a long-term debt of $2 billion. The debt-to-capitalization was 26.5%.

The Path Ahead

The domestic oil producers are unlikely to increase their spending anytime soon following the coronavirus pandemic’s adverse impact on global energy demand. In response to the market dynamics, National Oilwell Varco will likely sustain its disciplined approach to capital spending and improvement in its efficiency level.

Zacks Rank & Key Picks

National Oilwell Varco carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Southwestern Energy Company SWN, KLR Energy Acquisition Corp. ROSE and Sundance Energy Australia Ltd. SNDE, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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