CAM Cameron International Corp.

Shares of National-Oilwell Varco (NOV) hit a 52-week high of $82.80 on Wednesday, March 30. The oilfield services firm has seen its share price climb more than 100% since the end of July last year, as investors have been buying stocks of the company for its attractive fundamentals and positive outlook. The turnaround in fuel prices amid recent optimism about economic recovery have added to this bullish sentiment.

National-Oilwell Varco, which ranks ahead of Cameron International Corp. (CAM) as the biggest U.S. maker of oilfield equipment, has a Zacks #2 Rank (short-term Buy rating) in the short run.

The company – one of the largest manufacturers of drilling equipment in the world – has a large installed base of rigs worldwide that provides for a steady recurring revenue stream through demand for maintenance, parts and other expendable products.

National-Oilwell Varco’s strong backlog, which now stands at $5.0 billion, not only reflects steady demand from its customers but also offers long-term earnings and cash flow visibility. This enables the company to navigate the current uncertain environment better than many of its peers.

Following the Gulf of Mexico oil spill, we expect the company to benefit from the near-term requirements of better offshore safety equipment. Stricter regulations on drilling could translate into enhanced opportunities for equipment suppliers like National-Oilwell Varco.

The recent acquisition of Advanced Production and Loading PLC (“APL”) will further boost National-Oilwell Varco’s earnings visibility by expanding its floating production storage and offloading vessel (“FPSO”) product line, one of the fastest-growing areas of the offshore market. The recent influx of offshore rig awards adds to the positive sentiment.

As such, in the short-term, we believe National-Oilwell Varco is well positioned going forward and view it as an attractive investment.

Houston, Texas based National-Oilwell Varco, formerly National-Oilwell, is a world leader in the design, manufacture and sale of comprehensive systems, components, products and equipment used in oil and gas drilling and production worldwide.

The company reached its current form following the March 2005 merger between National-Oilwell and Varco International. National-Oilwell Varco organizes its operations in three business segments: Rig Technology, Petroleum Services & Supplies, and Distribution Services.

 
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