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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 (39)	2/7/2008 8:47:16 AM
From: Dennis Roth	Read Replies (1) \| Respond to of 44

National Oilwell Varco (NOV): 4Q orders and backlog strong; updating EPS estimates - Goldman Sachs - February 07, 2008 What's changed National Oilwell Varco reported 4Q07 EPS of $1.05, slightly above our estimate of $1.02 and in-line with consensus. Higher than expected margins in Rig Technology (25.8% vs. our 24.7% estimate) due to a favorable mix towards higher-margin aftermarket sales and improved manufacturing efficiencies accounted for the outperformance. Petroleum Service and Supply and Distribution were each slightly weaker by $0.01, which was offset by non-operating items. We have revised our 2008/2009/ 2010 EPS estimates to $4.85/$5.36/$5.69 from $4.81/$5.49/$5.57. Implications We are Not Rated on National Oilwell Varco shares. The following are the key takeaways from the quarter: (1) Bidding activity for rigs and equipment remains quite strong, driven by deepwater and jackup demand, as well as international land rig interest. In 4Q07, the company reported record orders and backlog in 4Q07 of $2.2 bn and $9.0 bn – both of which were $500 mn better than we expected. While demand remains robust, the 4Q07 level of orders is not expected to be repeated in 1Q08. (2) We lowered our 2008 operating margin assumption to 21.6% from 22.0%, which is flat with the 4Q07 level. We are now expecting weaker margins in the Distribution segment due to pricing in North America and flat margins in Petroleum Services and Supply due to international startup expenses. This is offset by slightly better margins in Rig Technology due to improved product mix and higher efficiencies, Valuation NOV trades at 2008 P-E/EV-DACF of 11.9X/10.0X versus FTI at 16.8X/13.4X and CAM at 15.3X/13.0X. Key risks Weaker-than-expected global economic growth or lower-than-expected oil company spending internationally.