National Oilwell Varco, Inc. NOV is set to release fourth-quarter 2017 results after the closing bell on Feb 5.
Houston, TX-based National Oilwell is a world leader in the designing, manufacturing and selling of comprehensive systems, components, products, and equipment used in oil and gas drilling and production worldwide.
Last quarter, the company delivered a positive earnings surprise of 12.5% on the back of strong contribution from its ‘Wellbore Technologies’ and ‘Completion and Production Solutions’ segments.
National Oilwell has an impressive track record of earnings surprise history, courtesy of its cost-reduction initiatives and improved efficiencies. The company delivered average positive earnings surprise of 18.95% in the trailing four quarters.
National Oilwell Varco, Inc. Price and EPS Surprise
National Oilwell Varco, Inc. Price and EPS Surprise | National Oilwell Varco, Inc. Quote
Factors at Play
Prices of oil at the end of the fourth quarter were $60.46 per barrel, up about 12.5% and 19.6% year-over year and sequentially, respectively. Improving energy landscape is attributed to tightening supplies, brighter demand outlook and OPEC-deal extension talks. The energy equipment supplier is likely to realize the benefit of recovering commodity price environment.
Rising momentum in the U.S. markets and modest improvement in international markets along with increasing demand are likely to improve the revenues of the company. Analysts polled by Zacks expect revenues of $1,936 million for the quarter, up 14.4% and 5.5% year-over-year and sequentially, respectively.
Robust performance from onshore-levered Wellbore Technologies segment is likely to buoy the company’s top line this quarter as well. The Zacks Consensus Estimate for revenues of the Wellbore Technology segment in the quarter under review is $725 million compared with $693 million reported in third-quarter 2017 and $531 million recorded in the year-ago quarter.We believe that the company’s cost-containment efforts and solid project execution will lead to positive results. As such, the Zacks Consensus Estimate of EBITDA for the Wellbore Technology segment is pegged at $108 million, significantly higher than $20 million recorded in the year-ago quarter. The figure is also ahead of the prior-quarter’s EBITDA of 94 million.
Further, the Completion and Production Solutions segment is also expected to drive the company’s results. The estimates of the backlog for the Completion & Production Solutions segment is $972 million compared with $818 million recorded in the year-ago quarter. Consequently, the segment’s revenue is pegged at $712 million in the quarter under review, reflecting an increase of 4.4% and 18.3% from the prior quarter and the year-ago level, respectively.
During the quarter, the company reconstituted its offshore-focused business segments by combining Rig Systems and Rig Aftermarkets into a single unit named Rig Technologies. The company also expects its Rig Technologies segment to deliver better results than the prior quarter.
What Does Our Model Unveil?
Our proven model shows that National Oilwell is likely to beat earnings in the to-be-reported quarter because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP for this company is +4.41%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: National Oilwell carries a Zacks Rank #3 (Hold) which when combined with a positive ESP, makes us confident of an earnings beat. Note that stocks with a Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Other Energy Stocks With Favorable Combination
National Oilwell is not the only energy firm looking up this earnings season. 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 this quarter.
Pioneer Natural Resources Company PXD has an Earnings ESP of +4.11% and a Zacks Rank #1. The company is expected to release fourth-quarter results on Feb 6.You can see the complete list of today’s Zacks #1 Rank stocks here.
TOTAL S.A. TOT has an Earnings ESP of +11.32% and a Zacks Rank #2. The company is expected to release fourth-quarter results on Feb 8.
NuStar Energy L.P. NS has an Earnings ESP of +7.46% and a Zacks Rank #3. The partnership is expected to release fourth-quarter results on Feb 8.
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