NOV Stock Down 24% in a Year: Should Investors Hold or Move On?

NOV Inc. NOV, a Houston, TX-based global provider of advanced oilfield equipment and energy technologies, has long been recognized for its deep industry roots and contributions to both traditional and renewable energy sectors. However, despite its strong legacy and continued innovation, the stock has declined 24% over the past year, raising critical questions for investors.

While NOV remains a key player in global energy infrastructure, recent financial results and emerging macroeconomic headwinds have clouded its near-term outlook. Weaker-than-expected earnings, rising costs and declining profitability have added pressure on the stock, leaving investors wondering: Is this just a temporary setback or a sign of deeper structural challenges?

Let us break down NOV’s recent performance, key risk factors and growth potential to help investors determine whether it is time to hold the stock or consider cutting your losses.

NOV's Disappointing Performance in Q1

The oilfield services and equipment provider posted adjusted earnings of 19 cents per share for the first quarter of 2025, missing the Zacks Consensus Estimate of 25 cents. Margin challenges in the Energy Equipment division largely drove the earnings miss.

Risks and Headwinds for NOV

Declining Net Income: NOV reported a net income of $73 million in first-quarter 2025, down 39% from $119 million in first-quarter 2024. The decline was attributed to lower equity income, unfavorable tax adjustments and higher corporate costs. This trend raises concerns about the company's ability to maintain profitability amid macroeconomic challenges.

Macroeconomic and Trade War Risks: NOV’s management highlighted significant uncertainty due to emerging trade wars, OPEC's decision to increase oil supply and weakening economic conditions. These factors are expected to dampen oilfield activity, particularly in North America, Mexico and Saudi Arabia. NOV anticipates tougher conditions in the second half of 2025, which could further pressure revenues and margins.

Tariff-Related Cost Pressures: NOV estimates $8-$10 million in unavoidable tariff expenses in second-quarter 2025, rising to $15 million per quarter thereafter. While mitigation efforts (e.g., supply chain adjustments) may offset 80% of tariff impacts, the remaining costs could erode margins. The company also faces inflationary pressures from U.S. suppliers due to reduced foreign competition.

Weakness in Shorter-Cycle Businesses: The Energy Products and Services segment, which includes shorter-cycle capital equipment, saw a 2% revenue decline year over year, with EBITDA dropping $29 million. Lower demand for drilling-related equipment in North America and Saudi Arabia contributed to the slump. Management expects second-quarter revenues for this segment to decline 5-8% year over year, signaling ongoing challenges.

Exposure to North America’s Market Volatility: NOV noted that North America’s activity is "most at risk" due to lower commodity prices and exploration and production (E&P) spending cuts. With 40% of revenues tied to North America, a slowdown in shale drilling could disproportionately hurt NOV compared with peers with stronger international exposure.

Backlog Growth Masking Near-Term Risks: While Energy Equipment backlog grew 12% year over year to $4.41 billion, management warned that project awards could be delayed due to macroeconomic uncertainty. The book-to-bill ratio of 80 in the first quarter also suggests slowing order momentum.

Higher Corporate Costs and Unallocated Expenses: Unallocated corporate costs rose significantly in the first quarter, contributing to the earnings miss. NOV expects these costs to remain elevated ($45-$55 million in the second quarter), further pressuring consolidated margins.

Free Cash Flow Sustainability Concerns: Though first-quarter free cash flow was positive at $51 million, the figure was below the $426 million returned to shareholders via buybacks/dividends over the past 12 months. With Capital expenditure and tariff mitigation costs likely to persist, future cash-flow generation may not support aggressive capital returns.

Limited Near-Term Catalysts: With management guiding for "modest" second-quarter growth but a potentially "much tougher" second half, near-term upside appears limited. The stock lacks clear catalysts until offshore activity rebounds or tariff impacts subside.

NOV Underperforms Oil Sector and Peers: NOV's share price has significantly underperformed both the Zacks Oil and Energy sector, and the Mechanical and Equipment Oil and Gas sub-industry. Over the past 12 months, the stock has declined 24.4%, while the sector and sub-industry have risen 3.7% and 3.1%, respectively. It also underperformed compared with industry peers. Kodiak Gas Services, Inc. KGS and Natural Gas Services Group NGS gained an impressive 35.6% and  43.6%, respectively. USA Compression Partners USAC also delivered a solid return, up 13% for the period. In contrast to NOV’s decline, both Kodiak Gas Services and Natural Gas Services Group posted strong double-digit growth, while USA Compression Partners showed resilience. The sharp divergence highlights NOV’s relative weakness within its competitive landscape.

12-Month Share Price Performance Comparison

Final Words: Avoid NOV Stock

The Zacks Rank #5 (Strong Sell) company faces several headwinds that raise concerns about its near-term prospects. The company's net income has declined sharply, due to higher costs and reduced equity income, while macroeconomic uncertainty and trade war risks threaten to dampen oilfield activity globally. Tariff-related expenses, coupled with inflationary pressures and weakening demand in key segments like shorter-cycle equipment, continue to strain margins. Additionally, NOV’s heavy exposure to North America’s volatile market, rising corporate costs and underperformance relative to peers further diminish investor confidence.

Given NOV’s exposure to North America’s volatility and limited near-term catalysts, investors may find better risk-adjusted opportunities elsewhere. Consider Kodiak Gas Services for its contract-backed revenue model, Natural Gas Services Group for the focused and capital-efficient approach, and USA Compression Partners for consistent cash flow and dividend reliability.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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