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Is National Oilwell Varco’s Share Price Losing Steam?

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Nov. 14 2016, Published 1:19 p.m. ET

National Oilwell Varco is trading lower

National Oilwell Varco (NOV) designs, manufactures, and sells equipment and components used in upstream energy production. It had a steady run in the stock market in 2016. On November 11, it was trading at $33.34. It was ~4% lower than its price at the beginning of the year.

The VanEck Vectors Oil Services ETF (OIH) rose 8.6% since January 1. Helix Energy Solutions Group (HLX), National Oilwell Varco’s smaller market cap peer, rose 76% during the same period. The entire OFS industry has been impacted negatively by the energy price crash since June 2014. West Texas Intermediate crude oil price recovered ~19% year-to-date. National Oilwell Varco accounts for 4.7% of OIH.

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What does the share price movement tell us?

In the past year, National Oilwell Varco’s share price fell since late November 2015 until February this year. Its quarterly revenues and net income in the past four quarters persistently stayed weak. Its cash flows, which remained strong until 1Q16, weakened in the following two quarters.

National Oilwell Varco’s moving averages

On November 11, National Oilwell Varco’s share price was at an ~3% discount to its 50-day moving average. It’s trading 2% above its 200-day moving average.

Moving averages exhibit a smoother trend following the stock’s price movement. A 50-day moving average is a short-term moving average, while a 200-day moving average shows a long-term trend. National Oilwell Varco’s short-term moving average, which stayed below its long-term moving average, crossed over in late July. Since then, it stayed above the long-term moving average. National Oilwell Varco’s share price stayed close to its long-term moving average since the first week of November. It indicates that the company’s share price is still bullish, but it’s facing some headwinds.

In this series, we’ll analyze National Oilwell Varco’s top line and bottom line growth, the effect of industry drivers on National Oilwell Varco’s growth, its dividend, and its dividend yield. We’ll start with management’s comments in the next part.

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