NOV Q2 Earnings Surpass Estimates, Revenues Increase Y/Y

NOV Inc. NOV reported second-quarter 2024 adjusted earnings of 57 cents per share, which beat the Zacks Consensus Estimate of 35 cents and increased from the year-ago quarter's level of 39 cents. The outperformance can be attributed to improving execution, customer demand and pricing.

The oil and gas equipment and services company's total revenues of $2.2 billion surpassed the Zacks Consensus Estimate by 1.5%. The top line also increased 5.9% from the year-ago quarter's figure of $2.1 billion. The better-than-expected performances in major segments are the influencing factors.

In the second quarter, NOV repurchased 2 million shares of common stock at an average price of $18.5 per share and increased its base dividend by 50%. NOV also recorded a net credit of $118 million, primarily attributed to gains from the divestiture of its Pole Products business.

The company declared an accelerated return of capital to its shareholders totaling $67 million in the quarter. This was executed through its share repurchases authorized under NOV's $1 billion program.

Segmental Performances

Energy Products and Services: The unit reported second-quarter revenues of $1.1 billion, which missed our projection of $1.07 billion, but exceeded the prior-year quarter's reported figure of $1 billion, attributed to strong demand in international and offshore markets.

Adjusted EBITDA of $184 million was below our estimate of $185.7 million. The reported actuals decreased from $198 million in the corresponding period of 2023, owing to declined North American activity.

Energy Equipment: Revenues in this segment increased 7.8% year over year to $1.2 billion. Additionally, the figure beat our projection of $1.15 billion.

Adjusted EBITDA of $142 million increased from the year-earlier quarter's level of $99 million. The segment's revenues and profitability increased because of solid demand for aftermarket products and services, strong execution on the growing capital equipment backlog and cost-saving initiatives. Additionally, the figure was more than our estimate of $140.7 million.

This segment experienced strong demand, with new orders of $977 million in the quarter, indicating a $466 million increase from that reported a year ago, resulting in a book-to-bill ratio of 177%.

As of Jun 30, the backlog for Energy Equipment capital orders was $4.3 billion, reflecting a $472 million increase from that reported a year ago.

Balance Sheet

As of Jun 30, 2024, the company had cash and cash equivalents of $827 million and long-term debt of $1.7 billion, with a debt-to-capitalization of 21.1%.

This Zacks Rank #3 (Hold) generated $432 million in operating cash flow and $350 million in free cash flow in this quarter.

Outlook

For the third quarter, the company's management projects consolidated revenues to be flat or increase by a low single-digit percentage range year-over-year, with adjusted EBITDA expected between $270 million and $305 million.

NOV's management also estimates consolidated revenue growth in the low to mid-single digits percent and Adjusted EBITDA between $1.10 billion and $1.18 billion for full-year 2024. The company expects capital expenditures to be $330 million for the same period.

NOV expects to maintain its commitment to returning excess free cash flow to its shareholders in the years ahead.

The company expects to return at least 50% of Excess Free Cash Flow through a combination of consistent quarterly base dividends, opportunistic stock buybacks and an annual supplemental dividend to adjust returns to its shareholders on an annual basis.

Important Energy Earnings So Far

While it's early in the earnings season, there have been a few key energy releases thus far. Let's glance through a couple of them.

Liberty Energy LBRT, the Denver-CO-based oil and gas equipment company, announced second-quarter 2024 adjusted earnings of 61 cents per share, which marginally beat the Zacks Consensus Estimate of 60 cents. However, LBRT's bottom line underperformed the year-ago quarter's reported figure of 87 cents due to a year-over-year increase in costs and expenses.

Ahead of the earnings release, Liberty's board of directors announced a cash dividend of 7 cents per common share, payable on Sep 20, 2024, to its stockholders of record as of Sep 6. As part of its shareholder return policy, LBRT repurchased the company's shares worth $30 million at an average price of $20.39 per share in the reported quarter. Liberty returned $41 million to its shareholders through share repurchases and cash dividends.

Houston, TX-based Halliburton Company HAL, an oil and gas equipment and services provider, reported second-quarter 2024 adjusted net income per share of 80 cents, in line with the Zacks Consensus Estimate and above the year-ago quarter profit of 77 cents (adjusted). The robust numbers reflect strength in the international markets.

As of Jun 30, 2024, the company reported $2.1 billion in cash and cash equivalents and $7.6 billion in long-term debt, representing a debt-to-capitalization ratio of 43.2. HAL also bought back $250 million worth of its stock in the April-June period. The company generated $1.1 billion of cash flow from operations in the second quarter, leading to a free cash flow of $793 million.  

Meanwhile, energy infrastructure provider Kinder Morgan KMI reported second-quarter adjusted earnings per share of 26 cents, in line with the Zacks Consensus Estimate. The bottom line was favorably impacted by strong financial contributions from the Natural Gas Pipelines, Products Pipelines and Terminals business segments. Moreover, KMI's second-quarter discounted cash flow (DCF) was $1.10 billion, up from $1.07 billion a year ago.