NATIONAL - OILWELL INC. (NOI) - undervalued/takeover ? Message Board

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Gold/Mining/Energy : NATIONAL - OILWELL INC. (NOI) - undervalued/takeover ?

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From: Dennis Roth	5/2/2007 6:58:10 AM
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Raising price target, estimates; reiterate Buy April 30, 2007 Goldman Sachs What's changed We raised our 2007/2008/2009 EPS forecasts by $0.60/$0.34/$0.34 or +10.6%/+5.0%/+4.3% to $6.28/$7.06/$8.21. We also raised our price target by $9 to $90 (=12x 2007E EV/DACF) due to higher estimates. Implications We reiterate our Buy rating for National Oilwell Varco (NOV) shares. For the second quarter in a row, the magnitude of the positive EPS surprise should remind the Street that NOV is an earnings story as much as a backlog story. The very strong 1Q performance should be a catalyst for another solid round of positive EPS revisions. We estimate that consensus numbers need to increase by, at a minimum, 13% or $0.69 just to catch up with National Oilwell Varco’s current operating performance, and this rise would still be conservative because it ignores the potential for further top-line growth and margin expansion. Valuation National Oilwell Varco is trading at a 2007 EV-DACF/P-E of 11.7X/13.8X, versus 14.0X/17.6X for FMC and 13.5X/16.7X for Cameron, which implies a discount of 16%/22% versus FMC and 14%/17% versus Cameron. Key risks Key risks to our thesis and price target include: (1) weakness in natural gas prices in the United States could potentially lead to a slowdown in E&P spending; (2) a slowdown in the economy could result in commodity weakness and potentially capex cuts; and (3) execution of large complex orders.

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