Why it is Not Wise to Buy NOV Stock After a 23% Decline in 6 Months

NOV Inc. NOV stock has been under heavy selling pressure, currently down more than 29% from its 52-week high. In the past few months, the oil and gas equipment and services giant has been lagging behind its Oil and Energy sector and the Zacks Oil and Gas Mechanical and Equipment industry. The stock has also struggled to keep up with its peers, such as Kodiak Gas Services KGS, Natural Gas Services Group NGS and Oil States International OIS. Analyzing 6-Month Price MovementImage Source: Zacks Investment Research NOV has declined 22.5% in the past six months. There are several red flags that indicate caution. For now, it might be best for investors to hold off on buying the stock.Here are the reasons -NOV Disappoints in Q3NOV reported adjusted earnings of 33 cents per share for the third quarter of 2024, missing the Zacks Consensus Estimate of 35 cents. The shortfall was primarily due to issues with execution, customer demand and pricing. On the other hand, the company's total revenues of $2.2 billion was below the expected figure, missing the consensus estimate by 2%.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Challenges in North AmericaOne of the biggest issues for NOV is its performance in North America, where it continues to face difficulties. Declining drilling activity, mainly caused by low natural gas prices and operators focusing on capital discipline, has hurt the company’s revenues in this region. Since North America is such an important market for NOV, these challenges limit the company’s growth potential, particularly in its short-cycle businesses like drill pipe sales and related services.Struggles Across Different Business SegmentsNOV's business segments have shown uneven performance in the third quarter. For instance, its Energy Products and Services segment saw a 3% year-over-year revenue decline, mostly because of lower demand for drill pipe and composite pipe systems. Additionally, the company's wind turbine installation vessel equipment segment has been facing a decline as projects near completion. This inconsistency in performance raises concerns about NOV’s ability to deliver steady growth moving forward.Pressure on MarginsDespite year-over-year revenue growth in the third quarter, NOV was under pressure regarding its margins. For fourth-quarter 2024, the company expects flat or slightly lower margins due to adverse product mix shifts, such as a decline in high-margin wind turbine equipment sales being replaced by lower-margin shipments. The company has also revised its 2024 margin target downward, raising concerns about profitability in the near term.Volatility in Customer SpendingAnother factor to watch is the volatility in customer spending. NOV’s short-cycle businesses, like consumables and aftermarket services, are highly sensitive to fluctuations in customer spending. Already, NOV has noticed a drop in aftermarket orders and customers seem to be taking a more cautious approach. This behavior could weigh heavily on the company’s performance in 2025, particularly in the drilling equipment segment.Declining EPS Estimates for NOVA troubling sign for NOV’s future is the recent downward revision in its earnings estimates. In the past month, 2024 earnings estimates have fallen 3.8% from $1.59 per share to $1.53. What is even more concerning is the nearly 7% decline in 2025 earnings estimates. This further indicates that NOV’s stock could face continued pressure as analysts adjust their expectations.Image Source: Zacks Investment Research Final Word: Avoid NOV for NowGiven the ongoing challenges and declining earnings outlook, it may be best for potential investors to hold off on buying NOV stock for now. The company's weak performance across multiple segments, margin pressure and declining earnings estimates all point to a cautious outlook. Until there are clear signs of improvement, NOV may not be the best pick for your portfolio. NOV currently carries a Zacks Rank #5 (Strong Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Just Released: Zacks Top 10 Stocks for 2025Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NOV Inc. (NOV): Free Stock Analysis Report Oil States International, Inc. (OIS): Free Stock Analysis Report Natural Gas Services Group, Inc. (NGS): Free Stock Analysis Report Kodiak Gas Services, Inc. (KGS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks