Wednesday, July 30, 2014
NOV (follow up)
I want to follow up on my blog post from yesterday, I want to talk about why the stock reacted the way it did to seemingly strong results. As soon as the company released earnings the stock jumped about 2% in early morning trading, however, after the conference call, it quickly started to decline, ending at down 1.52% for the day. I believe the reason for this is managements commentary on limited orders for new floaters into the third quarter and a couple quarters beyond that this decrease in demand is due to lower dayrates along with contracted capacity already coming to the market. However, they feel this is a challenge that will rollover into the first half of 2015 when they start seeing strong demand pick up. With this being said, I believe we should look passed the softening in demand for new floaters, and look at what will continue to support their strong revenue and earnings growth. Their impressive backlog with about 180 offshore newbuilds currently underway, strong demand for equipment in order to maintain and test offshore rigs over the next five years, their is growing demand for general equipment used to upgrade offshore rigs for float capacity, and lastly, their growing backlog for land rigs and land equipment. The reasons aforementioned will surely offset the softening in orders for new floaters.I intend to see some mixed results within each business segment of the company, but all in all I am still optomistic about this company and feel there is still plenty of room for capturing more upside.