NOV Inc. (NOV) Earnings & Analysis

Latest quarter

NOV reported third-quarter revenue above the consensus, although both the reported and consensus figures round to $2.2 billion. Adjusted earnings per share were $0.25, above the $0.24 consensus.

The company’s filing shows revenue of $2.23 billion, up 2% from a year earlier. Energy Products and Services revenue rose 9% to $1.06 billion as NOV increased manufacturing throughput against its drill pipe and composite equipment backlog. Energy Equipment revenue fell 2% to $1.22 billion, with the completion of offshore production projects outweighing increased demand for other products and services.

NOV’s operating margin increased to 6.38% from 4.92% a year earlier. The filing attributed higher Energy Products and Services margins to cost and operational improvements, while Energy Equipment benefited from project mix and improved margins in backlog.

CFO Rodney Reed said the quarter used $47 million of free cash flow, as Middle East conflict delayed milestone billings and collections and NOV maintained inventory buffers against logistics disruptions.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Jose Bayardo said deteriorating maritime security in the Middle East disrupted logistics, raised costs, affected equipment and spare-parts deliveries, and delayed tenders. Responding to a question about the region, he said suspended rigs and customers’ revised drilling programs were reflected in NOV’s fourth-quarter outlook, but that conditions beyond then were hard to predict.

In North America, Bayardo said public operators, service companies and drilling contractors remained disciplined with capital and wanted sustained improvements in pricing and returns before committing substantially to fleets. He said NOV nevertheless booked orders for new high-specification land rigs, a rig upgrade and a top drive. CFO Rodney Reed said market-share gains helped drive year-over-year growth in U.S. land drill-bit revenue.

For offshore drilling, Bayardo said customers preparing rigs for contracts needed parts, recertification and upgrades. He said the offshore aftermarket spare-parts backlog rose for a fifth consecutive quarter. Reed said improving day rates and floater utilization were supporting demand for services, repairs and upgrades.

Bayardo said offshore production equipment orders generally follow project investment decisions by a few quarters, and he expects more projects to move into procurement through 2027 and into 2028. He cautioned: “Large offshore awards are inherently lumpy and their timing can move between quarters.” Reed said Energy Equipment margins benefited from execution and improved backlog margins.

Asked about bookings, Bayardo lowered his estimate for the year’s book-to-bill ratio and said the timing of orders would affect how much backlog revenue grows during 2027. He also discussed NOV’s assessment that its portfolio had demonstrated capacity for $1.5 billion in annual EBITDA, based on annualized past business performance, adding: “This was not a forecast with a defined timeline.”

Guidance

Bayardo said NOV’s best estimate for the full-year book-to-bill ratio was 80% to 85%, down from the previously discussed 90% to 100% range. He said the timing of certain projects made the earlier range less achievable.