Additional Visibility Needed For NOV After Strong 3Q

National Oilwell Varco NOV has reported an adjusted 3Q EPS of $0.97 vs. Goldman's $0.92 estimate and also having improved margins in all segments. In the report, Goldman Sachs writes "NOV's recent run (+21% vs. OSX since late July) reflects improved clarity on the outlook for equipment orders which have started to show up in 3Q with a book-to-bill of 1 for the first time in 8 quarters. This is being driven by a bifurcation in the rig market, with high-spec rigs earning premium rates, and strong balance sheets among the drillers; not to mention a relatively new group of driller CEOs that appear more willing to build than during the early stages of the last cycle. Land equipment also has the wind at its back given strength in the US. However, post the rally, we need to gain more confidence that that established drillers will be able carry a larger share of the next newbuild cycle before becoming more bullish considering that they represented less than 30% of the total orders last cycle." Goldman Sachs maintains its Neutral rating and $52 price target. National Oilwell Varco closed yesterday at $52.03.