National-oilwell Varco Inc.

The income statement, balance sheet and cash flow figures in this section come from the FY2025 10-K (filed 12 Feb 2026), which includes comparatives, and the prior 10-Ks via SEC XBRL. Adjusted EBITDA is from company 8-Ks and the DEF 14A pay-versus-performance table. Ratios are derived.

Income statement

Notes:

• FY2025 diluted EPS of 0.39 is as reported. Other EPS values are derived from net income divided by weighted shares.

• DPS is derived. FY2024 = 0.05 + 3 × 0.075. FY2025 = 4 × 0.075 regular + 0.21 supplemental, which reconciles with USD 190M of cash dividends paid on 372M basic shares.

• FY2023 net income includes the USD 373M tax benefit.

Margins and growth

FY2021 growth is measured against FY2020 revenue of USD 6,090M. Revenue CAGR FY2021–FY2025 is about 12.2% (derived). The 5-year CAGR from FY2020 is about 7.5%.

Commentary. The five years trace a full recovery arc followed by a plateau.

FY2021: was the trough. The company was loss-making, with an adjusted EBITDA margin of just 4%.

FY2022–FY2023: revenue rose by more than half as international and offshore activity recovered, and adjusted EBITDA more than quadrupled to about USD 1.0B.

FY2024: marked the peak in operating margin (9.9% GAAP; 12.5% adjusted EBITDA margin), helped by the USD 130M Pole Products gain and aftermarket strength.

FY2025: saw a 1% revenue decline against a 7% fall in global activity. This demonstrates the stabilizing effect of EE backlog.

FY2025 GAAP profitability compressed sharply for four reasons:

1. Gross margin fell about 250bp on tariffs (about USD 25–30M per quarter by H2 2025) and inflation.

2. A USD 70M goodwill and long-lived asset impairment was recorded.

3. Equity-method income turned negative.

4. The effective tax rate jumped to about 60% on valuation allowances against deferred tax assets and a higher foreign earnings mix (Q4 2025 8-K).

Adjusted EBITDA exceeded USD 1.0B for the third straight year. That is the better gauge of run-rate earnings power.

Balance sheet

Intangibles, net: USD 450M (FY2023), USD 508M (FY2024) and USD 455M (FY2025). Goodwill plus intangibles at FY2025 totals USD 2,037M.

Commentary. Total debt has been essentially flat at about USD 1.7B for five years. It consists of USD 500M of 3.60% senior notes due 1 Dec 2029 and USD 1.1B of 3.95% senior notes due 1 Dec 2042, plus about USD 0.1B of other debt. NOV has therefore deleveraged through cash build rather than repayment. Net debt peaked at about USD 0.9B in FY2023 as working capital absorbed cash: inventories rose by about USD 820M between FY2021 and FY2023 during the backlog build. Net debt was cut to USD 166M by end-2025 as inventories were released. The company states that net debt to EBITDA is about 0.2x (Q4 2025 call). Accumulated other comprehensive loss of USD 1.42B, mainly currency translation, and a retained deficit of USD 673M reflect legacy downturn losses.

Cash flow

Commentary. The cash flow profile shows a sharp inflection in FY2024. Growth years (FY2022–FY2023) consumed about USD 1.6B of working capital, which made FCF negative despite rising EBITDA. Normalization in FY2024–FY2025 released working capital and drove FCF to about USD 0.9B per year, with conversion of about 85% of EBITDA. Management guided 2026 FCF conversion lower, to about 40–50%, as working capital rebuilds and capex rises with the Brazil flexibles expansion, which adds about USD 50M to 2026 capex (Q4 2025 call; Webull summary of the 25 Mar 2026 release). TTM FCF to June 2026 was about USD 562M (Benzinga, derived from quarterly cash flow).

Ratio analysis

All ratios are derived from 10-K data. FY2023 ROE is inflated by the USD 373M tax benefit; excluding it, ROE was about 10%.

Commentary. Return metrics remain modest for an industrial OEM. Peak ROIC of about 8.5% in FY2024 sits below a plausible cost of capital of about 9–10%. That gap is the core reason NOV trades at roughly 1.2x book. The most encouraging trend is in working capital: the cash conversion cycle shortened by about 26 days between FY2023 and FY2025. That reflects DSO discipline and inventory reduction, and underpins the FCF step-change. Liquidity is strong, with a current ratio above 2.4x, and leverage is negligible.

Recent quarterly trajectory (8-K earnings releases)

Derivation notes:

• Q1 2025 revenue is rounded and consistent with Q1 2026 being down 2% YoY.

• Q1 2025 net income is derived as Q1 2026 (19) plus the reported YoY decline (54).

• Q3 2025 net income is derived as FY2025 (145) less the other quarters.

• Q1 2025 adjusted EBITDA is derived as FY2025 (1,030) less Q2 to Q4.

• Q1 and Q3 2025 EPS are derived.

• Q2 2026 adjusted EBITDA includes about USD 40M of tariff refunds. Excluding the refunds, it was USD 243M (11.4%).

TTM to Q2 2026 (derived): revenue about USD 8.64B; net income about USD 95M (an aggregator reports USD 83M, a discrepancy noted); adjusted EBITDA about USD 985M.

Management guidance summary

FY2026: revenue slightly below FY2025's USD 8.74B; adjusted EBITDA in line to slightly below USD 1.03B, weighted to H2; FCF conversion of 40–50%; EE book-to-bill near 100%.

Q3 2026: revenue flat to up 2% YoY (about USD 2.18–2.22B); adjusted EBITDA USD 240–270M; EP&S revenue up 5–7%; EE revenue down 1–3%.

Year-to-date: H1 2026 adjusted EBITDA was USD 460M, including about USD 40M of refunds. The FY2026 outlook therefore implies H2 adjusted EBITDA of about USD 500–550M.

Consensus expectations

Consensus trading multiples imply EPS rising sharply in 2027 (forward P/E compressing from about 21x for 2026 to about 15x for 2027, per MarketScreener). That implies roughly 40% EPS growth in 2027, driven by cost-out, normalizing tax rates and offshore backlog conversion.

Bull case

1. Offshore production supercycle: offshore backlog grew more than 10% in 2025; flexible pipe is sold out into 2028 with capacity doubling; FPSO process and turret orders are strong. EE has already posted a record 16.4% EBITDA margin.

2. Self-help plus normalization: more than USD 100M of cost-out by end-2026, tariff mitigation and a normalizing tax rate (about 60% in FY2025) could lift EPS well above USD 1.00 without revenue growth.

3. Capital returns from a net-cash balance sheet: with about 0.16x net debt to EBITDA, about USD 326M of buyback capacity remaining and a 50%+ excess-FCF payout, roughly 7% annual shareholder yield is plausible in a normal FCF year.

Bear case

1. Commodity and geopolitical whipsaw: about 15% of revenue is Middle East-exposed, and shares react sharply to oil moves, as on 27 May 2026. A peace-driven oil collapse could trigger E&P capex cuts in 2027.

2. Structurally mediocre returns: ROIC has never exceeded about 8.5% in five years, and TSR has trailed peers every year per the proxy. The 10-year return is about -36%.

3. Short-cycle erosion: EP&S adjusted operating margin fell by more than 500bp in two years. Q2 2026 benefited from non-recurring tariff refunds, and FCF conversion falls to 40–50% in 2026.

Catalysts and monitorables (next 12 months)

• Q3 2026 results (expected late October 2026): delivery vs USD 240–270M EBITDA guidance; Middle East run-rate.

• EE orders and book-to-bill vs the near-100% target; flexible pipe and FPSO awards.

• Middle East status (Strait of Hormuz, ceasefire durability) and oil price path.

• Tariff regime changes and the sustainability of refunds.

• Delivery of the cost-out program by end-2026.

• FY2027 guidance (February 2027) and the size of the 2026 excess-FCF supplemental dividend.

• Progress on the Açu expansion.

• Potential renewal of the buyback authorization before its expiry around April 2027.

• Any portfolio actions under Bayardo, the first-year CEO.

Analyst verdict

NOV enters late 2026 as a financially fortified but return-challenged industrial at an inflection point in its mix. Over five years, NOV has rebuilt from a loss-making trough to a stable USD 1B adjusted EBITDA platform. It generated nearly USD 1.8B of free cash flow across FY2024–FY2025 and cut net debt to negligible levels. The strategic centre of gravity is clearly shifting from short-cycle North American consumables toward long-cycle offshore production equipment. That shift is visible in record flexible pipe and process systems performance, a record EE margin of 16.4% in Q2 2026, and a USD 200M capacity bet in Brazil underpinned by a backlog extending into 2028. This is a higher-quality, more visible earnings stream than NOV has historically offered.

Two problems persist. First, NOV has not proven it can earn its cost of capital: ROIC peaked at about 8.5% and the proxy shows five straight years of TSR underperformance. Second, FY2026 is a transition year. Guided EBITDA is flat, FCF conversion halves, and Q2's headline strength was flattered by about USD 40M of tariff refunds. With the shares at about USD 20, near consensus targets and around 15x FY2027 expected earnings, the market already discounts a meaningful recovery in 2027.

Our synthesis is neutral with a constructive bias. The balance sheet and capital-return framework limit downside, and the offshore production franchise offers genuine multi-year growth. Upside requires evidence on three fronts:

• Sustained EE margins at or above 15% without one-offs.

• EP&S margin recovery toward its FY2023 level of about 13.7%.

• Visible bottom-line delivery of the USD 100M cost-out.

Investors should track the Q3 and Q4 2026 prints and FY2027 guidance as the decisive tests of the new CEO's ability to convert backlog and self-help into returns above the cost of capital.