National Oilwell Varco Earnings: An Early Look

With hundreds of companies having already reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to National Oilwell Varco (NOV -0.42%). The oil-services company has become a one-stop shop for oil and gas exploration and production companies seeking to obtain all the materials they need to drill for and pump out oil and natural gas. Let's take an early look at what's been happening with National Oilwell Varco over the past quarter and what we're likely to see in its quarterly report on Friday.

Stats on National Oilwell Varco

Source: Yahoo! Finance.

Can National Oilwell Varco keep drilling up profits?
Analysts have been somewhat cautious about their view on National Oilwell Varco lately, with earnings-per-share estimates having declined by $0.03 over the past three months. That conservative attitude is consistent with the lack of movement in the stock price, which is up less than 1% since late October even in a generally bullish market environment.

The energy industry is a tale of two markets right now. Domestically, drilling activity has fallen somewhat as low prices for oil and especially natural gas depress interest in further exploration. But internationally, opportunities like the Santos Basin off Brazil's coast have Varco customer Petrobras (PBR 2.51%) scrambling to cash in on deepwater oil riches, and similar plays around the world could greatly boost Varco's sales in the long run.

To take advantage of current conditions, Varco has been on the acquisition trail lately. Last April, Varco paid Schlumberger (SLB -0.48%) $800 million for its Wilson distribution unit, which will help the company boost its capacity to deliver pipe, valve, and other operating supplies around the world. Meanwhile, Varco's larger pending deal to buy Robbins & Myers (NYSE: RBN) for $2.5 billion got shareholder approval, and Varco hopes the buy will add Robbins' expertise in providing specialized equipment to its rich mix of offerings. Varco needs to demonstrate that it has successfully integrated past acquisitions into its overall corporate structure in order to keep investors happy.

The big challenge that Varco must overcome in its quarterly report is convincing investors that it can overcome the slowdown in growth that has followed the explosion in unconventional drilling activity in recent years. International prospects are key to Varco's growth story, so focus on its views for the future of its global growth in assessing whether to add the stock to your portfolio.

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