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Actionable news in PBR: PETROLEO BRASILEIRO S.A.-PETROBRAS ADS (REP 1 COMMON SHARE),

National Oilwell Varco: The Good, The Bad, The Ugly

Summary

NOV's Q2 results were mixed.

The backlog fell less than 10% Q/Q. This was good.

EBITDA margins fell to 1%. It was better than I expected, but still bad.

Cash fell by $100 million to $1.7 billion. NOV should be a cash flow generating machine. This was ugly.

Continue to avoid NOV.

National Oilwell Varco's (NYSE:NOV) Q2 earnings were mixed. Revenue of $1.72 billion missed estimates by about $70 million, while EPS of -$0.30 beat by $0.02. Parts of the quarter were good, bad and ugly.

The Good - Backlog Was Steady

NOV bulls have pointed to its strong backlog as key to the stock. Regardless of falling E&P, the backlog would sustain the company; at least, that's how narrative went. That might no longer be the case. In Q1, the company wrote off $2.1 billion of its Petrobras (NYSE:PBR)-related backlog. That contributed to the backlog falling over 40% Q/Q to $4.3 billion. I thought there was an outside chance the backlog could fall sharply again this quarter; it did not. The backlog came in at $3.9 billion, down only 9%...


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