National Oilwell Beats Overall - Analyst Blog
February 02 2012 - 9:00AM
Zacks
Oilfield services company
National Oilwell Varco (NOV) reported stellar
fourth quarter and full year 2011 results, helped by robust
activity levels across all business segments and benefits from the
Ameron acquisition.
Earnings per share (excluding
transaction charges) came in at $1.37, comfortably above the Zacks
Consensus Estimate of $1.30 and the year-ago profit of $1.05.
For full-year 2011, the company
earned $4.77 per share, up 16.6% from $4.09 in the prior year. The
reported results also surpassed our earnings projection of
$4.69.
Quarterly revenue rose 34.3% year
over year – from $3,172.0 million to $4,259.0 million – and was
6.4% above our projection.
National Oilwell generated revenues
of $14,658 million in fiscal 2011, compared with $12,156 million in
2010. The fiscal result also breezed past the Zacks Consensus
Estimate of $14,400 million.
Segmental
Performance
Rig
Technology: Revenue in the Rig Technology segment
increased 31.8% year over year to $2,316.0 million in the quarter,
while revenue out of backlog was up 40% from the corresponding
period last year.
The segment’s quarterly operating
profit was up 20.4% year over year at $603 million. Rig
Technology’s profitability during the quarter was helped by higher
demand for aftermarket parts, services and capital spares.
Operating margin, at 26.0%, however, dipped from 28.5% in the
year-ago period.
Petroleum Services
& Supplies: The company’s Petroleum Services
& Supplies segment achieved revenues of $1,570.0 million, up
38.1% from the year-ago period, while operating profit rose 77.1%
from the fourth quarter of 2010 to $301 million.
Operating margin was 19.2% versus
15.0% in the year-ago quarter. The positive comparisons were due to
strong contributions from the Fiberglass Composite Pipe segment of
Ameron (acquired during the quarter).
Distribution
Services: Distribution Service revenues were up 32.4%
year over year at $560 million in fourth quarter. Operating profit
was $45 million, compared to $30 million in the year-earlier
quarter. Operating margin was 8.0%, up from 7.1% in the fourth
quarter of 2010. The segment results were helped by strong
performance in the Water Transmission and Infrastructure Products
segments of Ameron.
Backlog
During the quarter, National
Oilwell Varco added a record $1,670.0 million worth of orders to
its capital equipment backlog.
Backlog for capital equipment
orders for the company’s Rig Technology segment was $10,160.0
million at December 31, 2011, almost double the prior-year quarter
level.
Balance Sheet
As of December 31, 2011, the
company had cash on hand of $3,535.0 million and long-term debt of
$510 million. The debt-to-capitalization ratio stood at
approximately 2.8%.
Our
Recommendation
National Oilwell Varco, which ranks
ahead of Cameron International Corp. (CAM) as the
biggest U.S. maker of oilfield equipment, currently retains a Zacks
#2 Rank, which translates into a short-term Buy rating.
We have an optimistic outlook on
National Oilwell’s performance for 2012, based on its sound
financial profile, solid backlog and an efficient management team.
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.
CAMERON INTL (CAM): Free Stock Analysis Report
NATL OILWELL VR (NOV): Free Stock Analysis Report
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