National Oilwell Varco : The Most Favorable 'Out-Of-Favor' Investment For 2015
- Commodities prices are making energy stocks out of favor with market analysts.
- Level-headed investors should be able to find great value investments at this time.
- NOV's financial stability and strong profitability make it an ideal long-term investment.
ModernGraham Quarterly Valuation Of National Oilwell Varco
- NOV is suitable for both the Defensive Investor and the Enterprising Investor following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is undervalued at the present time.
- The market is implying 1.85% earnings growth over the next 7-10 years, which is significantly less than the rate the company has seen in recent years.
January Effect: Big Oil Sector Bounce Higher During 1st Quarter 2015?
- Tax loss selling has surely been exaggerating the down cycle of the oil industry price slide during December.
- The U.S. Federal Reserve may be working on some macro money printing solutions, if oil slides further, as deflation and default risks rise quickly for the whole economy.
- The clear calendar opportunity to play the end of tax loss selling off a panic low is through the energy stocks, particularly oil/gas equities.
Navigating The Turbulent Oil Market With National Oilwell Varco
- NOV has increased dividend payouts since the company began offerings in 2010.
- Its substantial cash on hand is sufficient to outlast turbulent oil markets.
- Core business diversification has positioned NOV as the premier equipment and service provider.
- Although NOV posted record results in Q3, the big question is how it will be affected in an adverse scenario of a low oil price throughout 2015.
- A low oil price is expected to affect mostly the major of the four segments of the company, which however accounts for just 44% of its total revenue.
- The article discusses the features of the company that provide great protection to its earnings against a scenario of a low oil price throughout 2015.
- National Oilwell Varco is a provider of heavy equipment used in the drilling of wells and construction of oil rigs.
- The company is high quality, with an exceptional moat and strong management.
- NOV passes all but one of my purchase criteria, and I consider it a buy.
National Oilwell Varco Might Benefit From Halliburton-Baker Hughes Merger
- Halliburton will have to sell considerable assets in order to meet the anti-trust regulations and NOV can pick up some assets.
- Drill bits and drilling fluids will be a good addition to the company's portfolio if the merging entity puts up these assets for sale.
- The acquisition of these assets will allow National Oilwell Varco to grow its customer base as well as revenues and cash flows.
- Falling oil prices have resulted in a broad decline in oil-related equities across the industry.
- National Oilwell Varco maintains a large diversified presence in the oil service industry.
- Possible consolidation and an ongoing share buyback program remain positive indicators going forward.
Could General Electric Target National Oilwell Varco?
- Low oil price puts mergers and acquisitions on the table.
- What makes NOV attractive?
- Why GE as a potential suitor?
National Oilwell Varco's Future Remains Bright After Q3 Results
- Q3 results has shown that National Oilwell Varco has remained solid in the midst of turmoil in the oil and gas sector.
- As the company continues to improve technology and introduces a buyback, shareholders' value will be improved tremendously.
- National Oilwell Varco remains as one of the most reliable energy plays around.
- National Oilwell Varco has posted massive growth in revenues and earnings in the third quarter.
- The company has the ability to prosper and sustain its profitability even in the depressed environment.
- National Oilwell Varco is still a good stock to hold.
National Oilwell Varco: Fair Valuation, Appealing Long-Term Prospects
- National Oilwell Varco posted solid third quarter headline results.
- At the same time the order intake is quite weak, causing doubts among investors.
- The fair valuation, strong track record, and solid financial position offer appeal in my eyes despite anticipated headwinds.
- National Oilwell Varco has been a phenomenal business over the last decade.
- Investors can look at mainly 3 key reasons to invest; Best-of-Breed Position, Excellent Management and a Dividend that is growing at breakneck speed.
- Owning a piece of NOV should prove to be very profitable in years to come.
National Oilwell Varco: Why The Market Reacted So Badly Yesterday
- NOV announced the first share buyback program in its history yesterday. The amount of the program is $3 B, which corresponds to 9% of the total outstanding shares.
- Although the buyback program provides an additional 5% daily bid on the stock, the market considered the announcement as a management's signal that there are no growth prospects ahead.
- Several companies have resorted to share repurchases only to mask their lack of growth or business deterioration at this phase of the economic cycle.
- However, given the excellent record of the management and the fair price at which the buybacks will be executed, I recommend purchasing shares if they drop further towards $70.
Benjamin Graham Would Like National Oilwell Varco Today
- NOV is suitable for both Defensive Investors and Enterprising Investors following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is undervalued at the present time.
- The market is implying 2.81% earnings growth over the next 7-10 years.
Fri, Jan. 9, 7:55 AM
- Oil and gas companies could cut E&P spending in North America by 30% or more this year if U.S. crude oil prices continue to trade at $50-$60/bbl, Barclays estimates on the basis of a survey of 225 oil and gas companies.
- The firm expects U.S. onshore rig count to fall by 500 rigs over the year to ~1,250 rigs by the end of 2015.
- Barclays says this is only the seventh time in the 30-year history of its survey that global spending is estimated to fall, adding that spending rose by more than 10% the following year after almost every decline.
- In the oilfield services group (NYSEARCA:OIH), the firm initiates Halliburton (NYSE:HAL), Baker Hughes (NYSE:BHI), National Oilwell Varco (NYSE:NOV) and FMC Tech (NYSE:FTI) at Overweight, and Forum Energy Tech (NYSE:FET) and Dril-Quip (NYSE:DRQ) at Underweight; Schlumberger (NYSE:SLB), Cameron (NYSE:CAM), Weatherford (NYSE:WFT) and Superior Energy (NYSE:SPN) are started at Equal Weight.
- ETFs: XLE, ERX, VDE, XOP, ERY, DIG, DUG, IYE, XES, IEO, IEZ, PXE, FENY, PXJ, RYE, FXN, DDG
Tue, Jan. 6, 10:37 AM
- Citigroup analyst Scott Gruber says now could be time for longer-term investors to bulk up on oil services stocks (NYSEARCA:OIH), taking the contrarian view that falling capital spending forecasts and looming bankruptcies by some E&P companies could portend that the industry’s shakeout is closer at hand.
- Meanwhile, Gruber says oil services stocks tend to stop falling as oil reaches "unsustainably low” levels, and investors appear to be through much of their selling since valuations have fallen so low.
- Oil services companies generally have been hit twice as hard as integrated oil majors during the past three months; related tickers include SLB, HAL, NOV, BHI, CAM, ESV, FTI, HP, TS, OII.
Mon, Jan. 5, 12:18 PM
- Energy stocks severely underperform the broader market, with the sector -4.2% vs. the S&P 500's -1.4%, as U.S. oil prices briefly slip below $50/bbl for the first time since April 2009; Nymex crude recently was -4.4% at $50.37, while Brent crude -5.9% at $53.08.
- Among the day's biggest losers: DNR -9%, RIG -7.6%, NBR -4.8%, CHK -5.9%, SDRL -9.1%, SD -12.3%, NOV -5.9%, PSX -6.2%, APA -5.9%, DVN -4.4%, EOG -6%, SU -5.2%, OXY -4.2%, APC -8.7%, PWE -9%, ECA -5.5%, MRO -5.3%.
- Global oil majors, which have been seen as less vulnerable to falling oil prices, are posting big losses: XOM -2.7%, COP -4.5%, CVX -3.8%, BP -5.8%, RDS.A -4.6%, TOT -6.5%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, FCG, DIG, PBW, BNO, GASL, DTO, DBO, DUG, IYE, XES, IEO, QCLN, IEZ, UWTI, PXE, USL, PXI, FENY, DWTI, PXJ, DNO, PSCE, RYE, SZO, PUW, FXN, OLO, DDG, HECO, TWTI, OLEM
Dec. 23, 2014, 6:19 PM
- Although the energy sector led today's stock advance, a raft of companies downgraded by Global Hunter mostly took it on the chin - none more so than Key Energy (NYSE:KEG), which plunged 15% after shares were cut to Reduce from Neutral with a $1.50 price target that was reduced from $2.50.
- Also downgraded to Reduce were HERO -6.1%, NBR -3.2%, DO +1.3%.
- Lowered to Neutral were HAL +0.5%, GEOS -8.9%, HP -2.9%, BAS -2.5%, PKD -2.5%, BHI +0.6%, BBEP -0.2%, MEP +0.1%.
- Downgraded to Accumulate: PES -3.5%, PTEN -1.1%, NGLS +2.9%.
- The firm upgraded five stocks - ATW, NOV, OII, RES and SPN - all of which gained in today's trading.
Nov. 25, 2014, 2:46 PM
- "Not surprisingly, billionaires reduced their energy allocations (NYSEARCA:XLE) during Q3," says Direxion, unveiling the quarterly rebalance for the iBillionaire Index (which serves as the benchmark for the IBLN ETF). Attention was instead shifted to healthcare (NYSEARCA:XLV) and materials (NYSEARCA:XLB), with companies like Humana (NYSE:HUM) and Monsanto (NYSE:MON).
- Also added to the index: TMO, GM, FB, CBS, GOOG, MAS, APD, DAL, NOV, WHR, THC, ABBV.
- Dropped from the index: AIG, MCK, CTSH, MSI, RIG, CI, APC, GPS, MSFT, CMCSA, NFLX, MHFI, WMB, ICE.
- Outlying sectors: Consumer Discretionary (NYSEARCA:XLY) makes up 23.33% of the iBillionaire Index vs. 11.68% for the S&P 500, and Industrials (NYSEARCA:XLI) and financials (NYSEARCA:XLF) make up just 6.67% each of the index vs. 10.44 and 16.30 of the S&P 500, respectively. Consumer Staples (NYSEARCA:XLP) have zero representation in the index vs. 9.7% in the S&P 500.
- Previously: Direxion launched an ETF with iBillionaire today
Nov. 18, 2014, 6:48 PM
- Halliburton’s (NYSE:HAL) $34.6B buyout of Baker Hughes (NYSE:BHI) has caused HAL shares to plunge 12% since the deal was announced Monday, the worst two-day performance for an acquirer’s stock this year; on average, a company announcing a deal has seen its stock pop 3.1% on the news.
- But analysts say the deal may present game-changing opportunities for a few small and mid-cap oilfield services firms with enough cash on hand to buy a chunk of HAL's expected divestments without diluting their stock or damaging their credit rating.
- Tudor Pickering Holt's Jeff Tillery speculates that Forum Energy Technologies (NYSE:FET), National Oilwell Varco (NYSE:NOV) and GE would be interested in HAL's manufacturing businesses that may come up for bid, while Superior Energy Services (NYSE:SPN) and Frank's International (NYSE:FI) might want certain services-oriented businesses.
- Weatherford (NYSE:WFT) would seem like a logical buyer of some assets and could make it happen with a mix of cash and stock, but RBC's Kurt Hallead thinks HAL might not want to cooperate with a company that could essentially become what Baker Hughes was.
Nov. 17, 2014, 3:59 PM
- In the wake of Halliburton's (NYSE:HAL) $34.6B offer for Baker Hughes (NYSE:BHI), it appears the next hot sector for M&A action is energy: More consolidation is likely, given the weakness for stocks in the oilfield services subsector, low interest rates, and as a drop in demand for oil increases cutthroat pricing competition.
- Speculation is running rampant as investors try to figure out who is next in an industry that is sure to undergo some more consolidation; some names identified as possible candidates include Kodiak Oil and Gas (NYSE:KOG), Marathon Oil (NYSE:MRO), Northern Oil and Gas (NYSEMKT:NOG), Anadarko Petroleum (NYSE:APC), Pioneer Natural Resources (NYSE:PXD).
- GE could go after National Oilwell Varco (NYSE:NOV) to show it is serious about the energy industry after last year’s purchase of pumpmaker Lufkin, Royal Bank of Canada says, and Oppenheimer says even BP could be an acquisition candidate.
- But Morgan Stanley does not see offshore drillers getting in on the action, as larger players like Diamond Offshore (NYSE:DO), Transocean (NYSE:RIG) and Seadrill (NYSE:SDRL) are still addressing dividend concerns while smaller companies such as Atwood Oceanics (NYSE:ATW) and Pacific Drilling (NYSE:PACD) still trade close to replacement value.
Nov. 14, 2014, 12:48 PM
- Oil services companies are mostly higher as Halliburton (HAL +1.7%) is indeed in talks to buy Baker Hughes (BHI +0.5%), a deal that would provide a jolt to oilfield services companies contending with falling oil prices: SLB +0.4%, OIS +1.2%, SPN +2.3%, CAM +0.2%, FTI -0.3%, NOV -0.6%.
- Sterne Agee analyst Stephen Gengaro calls a potential HAL-BHI combo a “HAL of a Frac-ing Deal," seeing several positives for HAL including strengthening its relatively weak position in artificial lift and production chemicals which are critical to enhancing HAL’s mature field strategy, enabling it to leverage its unparalleled U.S. pressure pumping logistics chain to enhance the efficiency of BHI’s operations, and providing the opportunity for significant cost savings which likely would total $600M-$750M or more.
- While antitrust concerns could force some divestitures, Gengaro does not believe it would prevent a deal from happening.
- Other potentially attractive M&A targets among oil services companies could include Dril-Quip (DRQ +0.7%), Frank’s International (FI +2.6%) and Oceaneering (OII -0.2%), Simmons & Co. says.
Nov. 13, 2014, 7:24 AM
Nov. 3, 2014, 12:24 PM
- National Oilwell Varco (NOV -1.5%) is lower after shares are downgraded at both Credit Suisse and Cowen.
- Credit Suisse cites a "double whammy" of onshore and offshore market slowdowns and a lack of near-term catalysts in cutting its rating to Neutral from Outperform and its price target to $77 from $93, adding that NOV is "making the transition from a growth stock to a total return stock in a market with some near-term headwinds."
- Cowen cuts the stock to Market Perform from Outperform with a $73 target, down from $81, against a backdrop of lower global E&P spending in 2015, flat spending in 2016, and minimal offshore rig awards over the next 2-3 years; however, it believes the downside is limited, in part due to NOV's $3B share buyback program.
Oct. 30, 2014, 10:59 AM
- National Oilwell Varco (NOV -2.3%) CEO Clay Williams says he would not be surprised to see the number of active drilling rigs fall modestly in 2015 in the wake of the recent drop in oil prices.
- Williams tells analysts in today's earnings conference call that lower prices historically have not impacted activity until three or four months have passed as oil and gas producers drill out their rig contracts.
- The CEO says NOV is cautiously optimistic about 2015 but bullish on 2016, believing that even if the market faces a downturn next year, the company’s $14.3B backlog of equipment orders and its diverse products should see it through tougher times.
- NOV reported better than expected Q3 earnings, as it saw higher demand for rig equipment and wellbore technologies amid a surge of fracking activity in west Texas and elsewhere.
Oct. 30, 2014, 7:07 AM| 2 Comments
Oct. 17, 2014, 10:17 AM
- Oil services (OIH +4%) stocks rip higher at the open following a strong earnings report from Schlumberger (SLB +7.4%) and as oil prices stabilize.
- Tumbling crude prices haven’t shaken the faith of at least two of the top providers of drilling and production services: SLB CEO Paal Kibsgaard describes the drop as “fear of short-term oversupply” and says the company is not changing a long-term view that its earnings will almost double from last year’s level by 2017, while Baker Hughes (BHI +4.7%) CEO Martin Craighead says his company's customers don't believe crude prices will stay low.
- HAL +5.5%, SPN +5.2%, WFT +5.1%, CAM +2.1%, NOV +2%, FTI +1.8%, DRQ +1.4%.
Oct. 16, 2014, 7:55 AM
- Baker Hughes (NYSE:BHI) -10.8% premarket after Q3 earnings rose 10% Y/Y but missed estimates, as political tensions in Libya and Iraq plus a sharp fall in drilling activity in the Gulf of Mexico weighed on margins.
- Q3 pre-tax profit margins in its operations in Europe, Africa and the Russia Caspian region fell to 8% from 17% in the year-ago quarter.
- Revenue of the North American segment, BHI's largest geographic business by revenue, rose 11% to $3.2B, and climbed 6% in the Middle East and Asia Pacific region, 8% in the Europe, Africa and Russia Caspian segment, and 3% in Latin America.
- Oil services stocks (NYSEARCA:OIH) to watch: HAL, SLB. SPN, NOV, CAM, FTI, DRQ.
Sep. 30, 2014, 5:34 PM
- National Oilwell Varco's (NYSE:NOV) 2.5% decline following news of the oilfield equipment maker's first-ever share repurchase plan is something of a head scratcher; it may be that investors expected more than a $3B buyback, or the drop simply may be part of today's broader weakness in energy stocks due to continued pressure on crude prices.
- Edward Jones analyst Rob Desai offers the possibility that the buyback may be a concern for some investors that NOV is in effect admitting there are growth challenges or perhaps not as many opportunities for acquisitions, but he adds that today's drop is an overreaction.
Sep. 30, 2014, 2:04 PM| 7 Comments
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