Thus far this earnings season, companies in the oilfield service sector have reported mostly strong results -- only to tack on caveats about an uncertain future. But Houston-based NATCO (NYSE: NTG) seemed to do the exact opposite.
For the quarter, the company reported $5.6 million in net income, or $0.28 per share, down from $12.1 million, or $0.63 a share, year over year. Its most recent quarter did include $2.6 million in legal and compliance review expenses.
NATCO makes a variety of wellhead process systems used in the production of oil and natural gas, including off-the-shelf separators, heaters, and dehydration equipment, along with a variety of made-to-order systems, and gas processing facilities for removing carbon dioxide from hydrocarbon streams. It also designs and manufacturers a host of control panels and systems for a variety of industries.
According to CEO John U. Clarke, NATCO's most recently completed quarter was hit by the effects of the now-infamous Gustav and Ike hurricane duo in the Gulf of Mexico, along with steel-price increases and a touch of revenue-recognition timing. But despite its somewhat uninspiring recent results, Clarke noted that NATCO's bookings during the quarter were 57% higher year over year, and that the "work will carry us well into 2009 and 2010."
NATCO's results have been materially different from the likes of Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL), and Weatherford (NYSE: WFT), all of which rolled out strong quarters, but remained guarded about coming periods. Dresser-Rand (NYSE: DRC), which also posted solid results, left out any future doom and gloom.
My suggested approach to NATCO, whose shares are down 70% from their 52-week high, is to simply keep tabs on the company for now, but to become more interested in the event of further booking increases and earnings expansions. This, frankly, is a little company without real across-the-board competition. Especially given its major share-price reduction, it could become worth your time in the face of an energy-price reversal.
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