Bank of America Analyst Chase Mulvehill updated NOV NOV from Neutral to Buy with a price target of $19.
The central theses: As NOV trimmed earnings in the first half of 2022, management has forecast second half 2022 Adjusted EBITDA to be 45% to 55% above the level of the first half.
Mulvehill expects NOV to continue to benefit from increasing capital expenditures for oilfield services, better pricing/fixed cost absorption and supply chain simplification.
NOV, formerly known as National Oilwell Varco, is a leading supplier of oil and gas rig equipment and products, such as: B. Drilling tools and drill bits pipe and well casing.
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The company is set to become debt-neutral by the end of 2023, and Mulvehill reported that he expects some of the smallest downside in consensus estimates among his peers in the event of a recession.
For fiscal 2022, B of A analysts forecast EBITDA of $640 million, up 1% over consensus estimates, with earnings per share of 69 cents per share, up 28% over consensus estimates.
Mulvehill explained that the analyst expects NOV’s CAPS segment to post EBITDA margin growth in the high single digits and closer to the peak by year-end, with stronger new order pricing and higher volume enabling better cost absorption from 2018 to 2019 of 14% above will reach the next 1-2 years, assuming no major recession.
In addition, NOV’s Saudi oil rig manufacturing facility will be ramped up and offshore wind revenue will double to $400 million year-on-year.
The Bull Case: Mulvehill reported that if this cycle turns out to have legs, it’s not unlikely that NOV’s overall EBITDA margins will eventually hit 15%, implying potential EBITDA in the $1.2 billion to $1.4 billion range would.
With more than 60% of NOV’s projected 2023 revenue coming from relatively more stable international markets, and net debt expected to fall below zero by the end of 2023, NOV is more defensive if…
