National Oilwell Varco (NOV) - Another Solid Result

We've exited a lot of pure "oil" plays - well frankly we never had huge positions in direct oil plays but we've had some exposure over the year to the oil services space due to the fact that with oil at $60, $80, $100, $120, or $140 they should thrive. National Oilwell Varco (NOV) is one of those names and they put out yet another quality quarter today, and it seems to be absorbing it's acquisition of Grant Prideco quite well [Dec 17: National Oilwell Varco is Buying Grand Prideco]

• National Oilwell Varco Inc (NOV), an oilfield services company, said on Tuesday its second-quarter profit rose 32 percent, exceeding Wall Street estimates, as high energy prices lifted demand for its drilling equipment.
• The company cited two areas of robust growth -- the offshore market where rig supplies are tight, and onshore North America, where exploration companies need new rigs as they expand rapidly in shale plays like the Haynesville in Louisiana.
• Pete Miller, the chief executive, told analysts on a conference call. "I think you'll continue to see backlog over the next foreseeable future be very good." (we like strong backlog - especially the $10.8 billion variety)
• Bill Herbert, oilfield services analyst with research firm and investment bank Simmons & Co International, characterized the results as "exceedingly strong" in a note to clients. (hedge funds disagreed - sending the stock up a whopping 1%)
• Profit in the quarter soared to $421.7 million, or $1.04 per share, from $318.5 million, or 89 cents per share, in the same quarter a year earlier. Profit, excluding one-time items related to its April merger with Grant Prideco Inc and a tax provision, was $486.5 million, or $1.20 per fully diluted share.
• On that basis, analysts, on average, expected a profit of $1.13 per share, according to Reuters Estimates.
• Revenue jumped 39 percent to $3.32 billion.
• Backlog for capital equipment orders for the company's rig technology unit as of June 30 increased 9 percent to $10.8 billion, with record new orders during the quarter of $2.2 billion. (but this does not compute - oil is down $25 in 3 weeks, how can business remain strong? My hedge fund computer says sell, sell, sell - story is over)
  

Another company growing 30-40% with a whopping forward multiple of 15. The "cyclical company" P/E curse continues to hover over these names - until/when/if people believe higher energy costs are here to stay it seems this will remain the issue.

[Feb 6: National Oilwell Varco - Solid Quarter]
[Oct 24: National Oilwell Varco Continues to Execute]

Long National Oilwell Varco in fund; no personal position