National Oilwell Varco (NYSE:NOV)
may well be undervalued, to begin with, but the company is looking at a
rough road for several years. Offshore drilling companies have
refreshed and renewed their fleets, and National Oilwell Varco was a
major beneficiary of that trend, but the weak utilization of offshore
rigs today and the poor prospects for a near-term turnaround in drilling
plans (absent a sharp reversal in oil prices) seem to point to a long
hangover for this leading equipment manufacturer.
I think
companies with leverage to service (offshore or onshore) and subsea will
recover more quickly, but National Oilwell Varco may have some appeal
if you are exceptionally patient and/or believe that drilling activity
is going to recover faster than most other analysts and investors expect
today. I think multiple approaches support the idea that NOV shares
should be trading in the low to mid-$50s, but I'm happier owning Cameron (NYSE:CAM) today.
Follow this link for the full article:
National Oilwell Varco May Be Undervalued, But It's A Long Road Back
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