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Gold/Mining/Energy : NATIONAL - OILWELL INC. (NOI) - undervalued/takeover ? -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (33)	2/26/2006 8:09:59 AM
From: Dennis Roth	Read Replies (1) \| Respond to of 44

National OilwellVarco (IL/A): Lowering 2006E EPS to consensus level; maintain 2007E w/ $79 fair value - Goldman Sachs - February 24, 2006 NationalOilwellVarco's recurring 4Q2005 EPS of $0.63 (excluding $0.05 integration + comp costs) was in line w/ our estimate and slightly above consensus, w/ Rig Technology below expectations (a recurring theme w/ disappointing 14% incrementals) + Distribution and Petroleum Svs & Supply stronger. Demand for drilling rig capital goods remains robust (though surprises are getting smaller), w/ orders of $900 mln above our $850 mln estimate + likely sustainable near term. Rig Tech margins are expected to rebound in 1Q, but skepticism bred from recent underperformance is warranted. We are lowering our 2006E EPS estimate to $3.05 (now in line with consensus) from $3.25 due mainly to slightly lower revenue growth. 2007E EPS remains $4.20. Our fair value estimate is $79 (18.5x 2007 EPS), which implies 22% upside potential. We maintain our IL/A rating. Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Terry Darling, Jerry Revich.