Shares of NOV (NOV -1.56%), the company formerly known as National Oilwell Varco, which supplies parts and services to the energy sector, rose steadily through morning trading on Wednesday before peaking with a gain of 11% at 1:30 p.m. EDT. The stock gave back a little ground, but was still higher by 9% at roughly 2 p.m. EDT.
The big driver here was the company's after-the-close earnings release on Tuesday. The headline numbers were rough, but investors were obviously looking at something else today.
NOV's revenue came in at about $1.25 billion in the first quarter of 2021; that was lower by roughly 6% sequentially from the fourth quarter last year and 34% below the comparable quarter in 2020. The company highlighted "extreme austerity" measures being taken in the exploration and production sector, with companies using parts from idled machines instead of buying them new. Bad weather and supply chain disruptions were also negatives.
The company lost $0.30 per share, which was an improvement over the year-ago period and the prior quarter, but it missed analyst projections. Normally, one would expect a stock to decline on news like this.
But CEO Clay Williams made some upbeat comments as well. For example, he noted that, "We are encouraged by signs of an emerging global recovery for our industry." And he highlighted higher rig activity leading to increased revenue from products (like drill bits) and services tied to activity levels. Also, as NOV's customers cut costs, so did NOV, leading to a 6-basis-point improvement in gross profit margin compared to the fourth quarter of last year.
NOV believes it is well positioned to benefit along with the broader industry as higher oil prices lead to increased activity. And it sounds like the benefits are already starting to show up. Now that's the type of update that investors can get excited about.
The energy industry is slowly coming back to life after a deep downturn in 2020, largely driven by the coronavirus. NOV's first-quarter results show the difficulties the industry is facing, but its forward-looking comments highlight the opportunity as the sector starts to rebound. It appears that investors were willing to look past an ugly quarter today in the hope that the positive momentum in the energy space keeps up.