Seeking Alpha
Long/short equity, energy, value, growth at reasonable price
Profile| Send Message|
( followers)  

Summary

  • NOV releases its Q1 earnings report on Monday, April 28th.
  • NOV will be spinning of its distribution segment into a new company called NOW, Inc.
  • This separation will cause increased volatility of NOV's stock price.

National Oilwell Varco, Inc. (NYSE:NOV), will release its Q1 earnings report on Monday, April 28th. Let's take a look at what analysts are expecting and where the company will be headed moving forward.

Earnings Preview

NOV is projected to post relatively strong numbers for the Q1 of 2014. Analysts are predicting a year-over-year increase in earnings per share of 7%, up to $1.38. As of right now, NOV's predicted yearly EPS for 2014 is also expected to increase up to 6.15 from 5.52 last year, an 11% increase.

In general, these numbers look good after NOV saw its yearly EPS fall last year from its 2012 numbers. This year's numbers look to improve on 2013 and better 2012 as well in terms of EPS.

Source: FactSet

Forward Outlook

NOV's numbers and projections look really good looking forward. Analysts' average price target for the stock is currently $91.50 and many are listing it as a buy. Despite this, there's one thing that will really determine how the stock performs moving forward, and that is the company's proposed separation of its distribution unit into an entirely different company that will be called NOW, Inc. This transformation is currently estimated to go through sometime in either Q2 or Q3 of this year. The company's board of directors and management believe that the split is necessary because it will enable each company to pursue more of an industry specific strategy as well as manage resources and capital with more efficiency. The split will also give investors a more targeted investment opportunity as far as the industry and company activities goes. Current stockholders of NOV will receive a yet to be determined amount of NOW, Inc. shares when the split officially goes through.

The problem with this split will be the volatility it will create in NOV's stock price. As of right now, there are too many variables that are yet to be determined to tell just how much this will affect the company's stock price. It will be extremely difficult to determine how much the company's price will change, but I expect it to drop at first just from the fundamental fact that the company's overall value will be decreasing. Sure investors will be receiving shares of the new company that will be created, but until there's a better idea of the numbers and figures involved in the split, it's hard to see where NOV will go. I recommend keeping a close watch on the proceedings until more certain numbers are released. Until then, I consider NOV a strong investment hold on to.

Source: NOV Inc. Form 10

Source: National Oilwell Varco - Company Outlook And Earnings Preview