Saturday, March 7, 2015

National Oilwell Varco Faces Revenue Decline, But Is Priced Attractively For Long-Term Investors

This article was first published by Seeking Alpha on February 11, 2015.

By Sarfaraz A. Khan

National Oilwell Varco (NYSE:NOV), which designs, manufactures and sells equipments and components used by exploration and production companies in oil and gas drilling, has recently released its quarterly results that came in better than market's expectations.

National Oilwell Varco's revenues climbed 7.7% from the same quarter last year to $5.7 billion while gross margins expanded by 60 bps to 27.1%. Adjusted EBITDA increased by 8.6% to $1.2 billion while adjusted EPS increased by 13% to $1.69 a share, higher than analysts' estimate of $1.60 a share, as per data compiled by Thomson Reuters.

The Rig Systems segment, under which NOV manufactures and sells equipment used in drilling rigs, has been the largest contributor to the company's revenues. This is followed by Wellbore Technologies, under which NOV provides products to improve the drilling process and Completion and Production solutions segment, in which - as the name implies -- the company provides equipment for well completion and hydrocarbon production.

On an average, over the last four fiscal years, NOV has generated nearly 40% of its revenues from rig systems, 27% from Wellbore Technologies and 20% from completion and production solutions. The remaining revenues have come from sale of rig aftermarket products.

During the quarter, NOV witnessed around 7% revenue growth in the rig systems business and double-digit growth in other segments. In terms of operating profits, NOV reported double-digit growth in all segments. Furthermore, the company also reported improvements in operating margins in every segment.

Overall, NOV delivered a strong performance, but … read full article at Seeking Alpha.