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NOV Q1 Earnings Surpass Estimates, Revenues Increase Y/Y

NOV Inc. NOV reported first-quarter 2023 adjusted net profit of 32 cents per share, which beat the Zacks Consensus Estimate of 22 cents. The bottom line also turned around from the year-ago quarter’s loss of 13 cents.

Total revenues of $2 billion surpassed the Zacks Consensus Estimate by 0.4%. The figure also rose 26.4% from the year-ago quarter’s level of $1.5 billion.

The improvement in both earnings and revenues can be attributed to the robust performance of NOV’s Rig Technologies and Completion & Production Solutions segment.

Segmental Performances

Rig Technologies: The unit reported first-quarter revenues of $550 million, which beat the Zacks Consensus Estimate of $545 million. The figure also exceeded the prior-year quarter’s figure of $441 million. Adjusted EBITDA of $69 million beat the Zacks Consensus Estimate of $64 million. The actuals also increased from $36 million recorded in the corresponding period of 2022.

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Wellbore Technologies: Revenues in this segment improved 22.5% to $745 million year over year. The figure, however, missed the Zacks Consensus Estimate of $762 million. Adjusted EBITDA of $133 million increased from the year-earlier quarter’s level of $101 million but missed the consensus mark of $146 million. This could be due to ongoing supply-chain issues that hampered the segment’s drill pipe operations.

Completion & Production Solutions: The segment’s revenues rose 35.4% to $718 million year over year. The top line also beat the Zacks Consensus Estimate of $701 million. Adjusted EBITDA of $54 million increased from the year-ago quarter’s level of $10 million. The figure also exceeded the consensus mark of $52 million, primarily due to better management of the ongoing supply-chain disruptions, an improved product mix and better execution of the company’s manufacturing plans.

Backlog

At the end of March 2023, order backlog for Rig Technologies’ capital equipment was $2.88 billion, including $251 million worth of new orders. The same for the Completion & Production Solutions segment was $1.60 billion, comprising $407 million worth of new orders.

Balance Sheet

As of Mar 31, 2023, the company had cash and cash equivalents of $774 million and long-term debt of $1.73 billion, with a debt-to-capitalization of 24.5%.

Outlook

Despite recent weakness in commodity prices, NOV's outlook for 2023 is positive for each of the three segments.

The company expects its floating rig count to recover soon from the pandemic. Based on the FID projection and current contracting rate, many more rigs are likely to be in demand by 2024.

For the second quarter, the company expects a mid-single-digit increase in revenues from the Completion & Production Solutions segment. It also anticipates EBITDA flow-through in the lower 30% range and EBITDA margin in low-double digits for 2023.

Activity growth in the Eastern Hemisphere and drill pipe manufacturing operations in Wellbore Technologies are expected to offset headwinds from softening activity in North America.  This, in turn, is anticipated to cause a sequential revenue improvement in the mid-single-digit percent range for the second quarter.

The company also expects an inventory rise in the Rig Technologies segment. This is due to the flow of castings and forgings needed to support the unit’s backlog of spare parts, rig refurbishment and equipment repair. This inventory growth is expected to boost revenues in the second quarter and beyond.

This business unit is also expected to gain from increased activity in the Eastern Hemisphere and the recapture of additional high-spec drilling motor market share.

NOV is gaining wider adoption of its digital solutions through several agreements, including a recent global contract with a major integrated oil company to provide edge computing, edge-to-cloud and cloud-based solutions.

The company expects continued market share gains in North America, and incremental activities in the Gulf of Mexico and international markets for 2023.

It anticipates free cash flow in the range of $100-$300 million.

Zacks Rank and Other Key Picks

Currently, NOV carries a Zacks Rank #2 (Buy). Some other top-ranked stocks for investors interested in the energy sector are CVR Energy CVI, sporting a Zacks Rank #1 (Strong Buy), and Marathon Petroleum MPC and Ranger Energy Services RNGR, each holding a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

CVR Energy: CVI is worth approximately $2.63 billion. CVI currently pays investors $2.00 per share, or 7.63%, on an annual basis.

The company currently has a forward P/E ratio of 6.59. In comparison, its industry has an average forward P/E of 8.60, which means CVI is trading at a discount to the group.

Marathon Petroleum: MPC is valued at around $58.02 billion. It delivered an average earnings surprise of 20.91% for the last four quarters and its current dividend yield is 2.30%.

The company currently has a forward P/E ratio of 6.36. In comparison, its industry has an average forward P/E of 9.10, which means MPC is trading at a discount to the group.

Ranger Energy Services: RNGR is valued at around $242.99 million. In the past year, its shares have gained 16.8%.

Ranger Energy Services currently has a forward P/E ratio of 5.30. In comparison, its industry has an average forward P/E of 11.60, which means RNGR is trading at a discount to the group.

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Ranger Energy Services, Inc. (RNGR) : Free Stock Analysis Report

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