NOV (NOV) offers potential upside from improvement in offshore and short-cycle activity, but there are more attractive ways to play these themes at present, RBC Capital Markets said Tuesday in a note.

Major tailwinds include improved offshore activity in the second half supporting rig aftermarket revenue, ongoing progress on the Brazil flexible pipe, and improvement in the Middle East drilling and completion activity. NOV's energy equipment business is also executing on a $4.4 billion backlog, providing short-term financial stability, according to the note.

NOV generates about 15% to 20% of its revenue from the Middle East, exposing it to the Iran war, while its product-based business faces inflationary pressure from higher transportation costs, the brokerage said.

RBC raised its 2026 US land rig count estimate to 544 active rigs and said it would seek pressure pumpers for the most torque, in terms of utilization and pricing. Similarly, deescalation in the Middle East will likely benefit service-based companies more, the firm added.

RBC's Q1 EBITDA estimate of $207 million is below the Street estimate of $210 million and NOV's guidance of $200 million to $225 million. The mid- to longer-term outlook is also not differentiated versus oilfield services peers, the brokerage said.

RBC downgraded NOV to sector perform from outperform, with a price target of $21.

Price: 19.23, Change: -0.40, Percent Change: -2.06