Why Morgan Stanley Is Downgrading National-Oilwell Varco

In a report published Wednesday, analysts at Morgan Stanley downgraded

. The price target is set to $53. The analysts expect a sharp decline in the demand for the company's offshore drilling equipment, going forward. "NOV is one of the most impressive companies within our entire coverage universe. Its offshore rig equipment suite is by far the most complete in the industry as well as the industry standard, in our view," the analysts said. The company also has an impressive track record of industry leading margins and turning around underperforming businesses via acquisitions. However, given National-Oilwell's full suite of drilling products, the analysts believe that there is little room for the company to avoid the impact of declining offshore rig orders, expected over the next 12-18 months. While the company's intension to expand into floating production solutions seems promising, much more will be needed to make a significant positive difference. "We are excited about NOV's expansion into FPSO related technologies like flexible risers and Turret/Mooring systems. This is an area of the energy supply chain plagued by inefficiencies and arcane work practices, leaving room for NOV to shake up the industry," the analysts added. According to Morgan Stanley, the company would need to make more "subsea technology related product equipment acquisitions" for it to have a substantial impact on its numbers.