Global large-cap energy equipment maker National Oilwell Varco Inc. (NOV) reported strong second-quarter 2014 earnings, buoyed by growing demand for oilfield equipment.
Earnings per share (excluding one-time items) came in at $1.61, surpassing the Zacks Consensus Estimate of $1.45 and improving from the year-ago adjusted profit of $1.39.
Quarterly revenues increased 12.3% year over year from $4,680.0 million to $5,255.0 million but fell short of the Zacks Consensus Estimate of $5,631.0 million.
Segmental Performance
Up to the first quarter of 2014, the company operated through three segments: Rig Technology, Petroleum Services and Supplies, and Distribution & Transmission. From the quarter under review, National Oilwell has started to report its operations through four segments, namely Rig Systems, Rig Aftermarket, Wellbore Technologies and Completion & Production Solutions.
Rig Systems: Revenues came in at $2,372.0 million, up 14.0% from the year-ago quarter, while revenue from backlog was $2,070.0 million. Moreover, the unit’s operating profit increased significantly (by 27.5% year over year) to $501.0 million. Operating margin, at 21.1%, also came ahead of 18.9% in the year-ago period. Oilfield equipment’s significant demand during the quarter aided the results.
Rig Aftermarket: The segment generated revenues of $785.0 million, up 17.2% from the year-ago period, while operating profit improved 14.8% from the second quarter of 2013 to $217.0 million. However, operating margin was 27.6%, reflecting a decline from 28.2% in the year-ago quarter.
Wellbore Technologies: The segment’s revenues climbed 18.3% year over year to $1,446.0 million. Operating profit was $269.0 million, up 38.0% from the year-earlier quarter. Operating margin for the unit came in at 18.6%, up from 16.0% in second-quarter 2013.
Completion & Production Solutions: Revenues for the segment were recorded at $1,127.0 million, up 6.6% from $1,057.0 million in the year ago quarter, owing to higher demand for completion and production equipment. On the flip side, the unit’s operating profit came in at $158.0 million, down 3.1% year over year. Moreover, operating margin was 14.0%, lower than 15.4% in the year ago quarter.
Backlog
Capital equipment orders’ backlog for Rig Systems was $15,390 million as of Jun 30, 2014, up 20.0% from the corresponding quarter last year.
Moreover, Completion & Production Solutions segment reported a backlog of $2,140.0 million in capital equipment order as of Jun 30, 2014. The figure increased 44.0% from the year ago quarter.
Balance Sheet
At the end of the second quarter, the company had cash on hand of $3,885.0 million and long-term debt of $3,148.0 million. The debt-to-capitalization ratio stood at approximately 12.8%.
Zacks Rank & Stock Picks
National Oilwell Varco currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the same industry like Cameron International Corporation (CAM), Weatherford International plc (WFT) and Dril-Quip Inc. (DRQ). Cameron and Weatherford sport a Zacks Rank #1 (Strong Buy), while Dril-Quip carries a Zacks Rank #2 (Buy).
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
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment