National Oilwell (NOV): What's Expected In Q2 Earnings?

Houston, TX-based energy equipment manufacturer National Oilwell Varco Inc. (NYSE:NOV) is set to release second-quarter 2016 financial results before the opening bell on Jul 28.

Last quarter, the company delivered a 45.45% positive earnings surprise. Moreover, National Oilwell posted an average positive earnings surprise of 23.54% over the last four quarters. Let’s see how things are shaping up for this announcement.

Factors Likely to Influence This Quarter

National Oilwell boasts a strong balance sheet with a debt to capitalization ratio of about 17%. The company’s financial strength and sound backlog makes it better suited than most of its peers to withstand volatile commodity prices.

Through the quarter, oil price improved significantly from mid-February when West Texas Intermediate (WTI) crude fell to a 12-year low mark of $26.05 per barrel. Moreover, last month, oil prices settled above the psychologically important $50 per barrel level for the first time in more than 10 months.

The improvement in oil prices should come up as a blessing for energy equipment manufacturers. However, the company projected that since their business is mainly carried by drilling related work, the record low rig count that dragged overall activities down during the April to June period will hurt its revenues.

Earnings Whispers

Our proven model does not conclusively show that National Oilwell is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The company currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 33 cents per share.

Zacks Rank: National Oilwell carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.

The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

NATL OILWELL VR Price, Consensus and EPS Surprise

NATL OILWELL VR Price, Consensus and EPS Surprise | NATL OILWELL VR Quote

Stocks to Consider

Here are some companies from the energy space that, according to our model, have the right combination of elements to post an earnings beat this quarter.

Anadarko Petroleum Corporation (NYSE:APC) has an Earnings ESP of +1.30% and a Zacks Rank #2 (Buy). The company is likely to release earnings results on Jul 26.

Legacy Reserves LP (NASDAQ:LGCY) has an Earnings ESP of +31.58% and a Zacks Rank #1 (Strong Buy). The partnership is expected to release earnings results on Aug 3.

Pioneer Natural Resources Co. (NYSE:PXD) has an Earnings ESP of +19.44% and a Zacks Rank #2. The company is anticipated to release earnings on July 27.