National Oilwell Varco Inc., the biggest U.S. maker of oil-field equipment, said the profit margin in its largest business unit will grow more slowly than expected amid sluggish demand for U.S. hydraulic fracturing.
The margin for rig technology dropped to 22 percent in the fourth quarter from 26 percent a year earlier, the company said today in a statement announcing its fourth-quarter earnings.
“Rig tech margins are now expected to remain at lower levels through the rest of this year, which is below consensus expectations,” James West, an analyst at Barclays Plc in New York, said today in a telephone interview. Barclays was expecting the margin to average about 25 percent in 2013, said West, who rates the shares at overweight, equivalent to a buy, and owns none.
National Oilwell fell 3.9 percent to $71.26 at the close in New York, the biggest decline for the Houston-based company since June 25.
Shares are also down because of the company’s view of the U.S. land market, West said. The company isn’t yet seeing signs that the onshore rig count will increase, Chief Financial Officer Jeremy Thigpen said. Schlumberger Ltd., the world’s largest oilfield services provider said earlier this month it expects the U.S. rig count to grow by as many as 150 rigs in the first quarter.
The rig technology unit’s margin‘could tick up slightly,’’ in the first quarter, Thigpen told analysts and investors today on a conference call.
Net income climbed to $668 million, or $1.56 a share, from $574 million, or $1.35, a year earlier, Houston-based National Oilwell Varco said in the statement. Excluding one-time items, the company earned 5 cents more than the $1.44 average of 27 analysts’ estimates compiled by Bloomberg. Sales increased 33 percent to $5.69 billion.