NOV Earnings: Offshore and International Expansion Offset Weakened North American Drilling Activity

NOV NOV posted solid second-quarter results as strong investment in international and offshore markets offset a softened North American land market. NOV’s operations are approximately evenly split between onshore and offshore production as well as North American and international end markets. We expect the prevailing industry dynamics will persist through year-end, setting the stage for strong 2023 operating performance that will likely improve when North American activity rebounds (expected in early 2024). We maintain our no-moat rating and $23 fair value estimate following results.

All three of NOV’s operating segments contributed to second-quarter revenue growth, which increased 21% year over year and 7% sequentially. Profitability was a bit more mixed but overall flat to positive quarter over quarter. Wellbore Technologies contributed the most margin accretion due to progress in mitigating impacts from the significant supply chain disruption that arose in its drill pipe business last quarter. The issue is not yet completely resolved, but segment EBITDA improved over 250 basis points to 20.4%, above its 2022 average of 18.4%. We expect segment will maintain similar profitability levels through year-end.