On Oct 4, Zacks Investment Research upgraded global large-cap energy equipment maker National Oilwell Varco Inc. (NOV) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Last week, National Oilwell got an authorization from the board of directors to buy back common shares worth $3 billion. The share repurchase represents management's continuous aim to return capital to its stockholders.
National Oilwell has a strong business model which has been generating significant operating cash flows. The increased earnings are being used by the company for investment in strategic growth projects and also for returning capital to shareholders either through dividend or share buyback programs.
Moreover, National Oilwell is one of the biggest manufacturers of drilling equipment in the world. The company’s large installed base of rigs worldwide provides for a steady recurring revenue stream through demand for maintenance, parts and other expendable products.
Additionally, the growing search for oil in new deepwater frontiers has significantly increased the demand for rigs capable of tackling the immense challenges of drilling in a mile or more of water. We believe that the company is well positioned to supply such technologically advanced production equipment. National Oilwell also has a strong balance sheet with a debt to capitalization ratio of 13%.
Other Stocks to Consider
In addition to National Oilwell, one can also consider players in the same industry like Superior Energy Services Inc. (SPN), McDermott International Inc. (MDR) and Oil States International Inc. (OIS). Superior Energy Services sports a Zacks Rank #1 (Strong Buy), while McDermott and Oil States International carry a Zacks Rank #2.
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