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1. Company Snapshot

1.a. Company Description

NOW Inc.distributes downstream energy and industrial products for petroleum refining, chemical processing, LNG terminals, power generation utilities, and industrial manufacturing operations in the United States, Canada, and internationally.The company offers its products under the DistributionNOW and DNOW brand names.


It provides consumable maintenance, repair, and operating supplies; pipes, valves, fittings, flanges, gaskets, fasteners, electrical products, instrumentations, artificial lift, pumping solutions, valve actuation and modular process, and measurement and control equipment; and mill supplies, tools, safety supplies, and personal protective equipment, as well as applied products and applications, such as artificial lift systems, coatings, and miscellaneous expendable items.The company also offers original equipment manufacturer equipment, including pumps, generator sets, air and gas compressors, dryers, blowers, mixers, and valves; modular oil and gas tank battery solutions; and application systems, work processes, parts integration, optimization solutions, and after-sales support services.In addition, it provides supply chain and materials management solutions that include procurement, inventory planning and management, and warehouse management, as well as solutions for logistics, point-of-issue technology, project management, business process, and performance metrics reporting services.


The company serves customers through a network of approximately 180 locations in the upstream, midstream, and downstream sectors of the energy industry, including drilling contractors, well-servicing companies, independent and national oil and gas companies, midstream operators, and refineries, as well as petrochemical, chemical, utilities, and other downstream energy processors; and industrial and manufacturing companies.NOW Inc.was founded in 1862 and is headquartered in Houston, Texas.

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1.b. Last Insights on DNOW

DNOW Inc.'s recent performance was negatively impacted by Bailard Inc. reducing its stake in the company by 30.4%. The institutional investor sold 18,974 shares, potentially signaling decreased confidence. However, DNOW recently reported Q3 earnings exceeding estimates, with EPS of $0.26 per share, beating the Zacks Consensus Estimate of $0.24. The company's acquisition of MRC Global, completed on November 6, is expected to create a premier solutions provider to energy and industrial markets, with anticipated cost synergies of $70 million.

1.c. Company Highlights

2. DNOW's Q3 2025 Earnings: A Strong Performance Amidst Merger News

DNOW reported revenue of $634 million for Q3 2025, in line with their guided forecast and representing the highest revenue quarter in almost six years. EBITDA came in at $51 million or 8% of revenue, marking a significant improvement year-over-year. The company's EPS beat analyst estimates, coming in at $0.26 compared to the expected $0.24. The strong financial performance was driven by a focus on customers, disciplined cost management, and greater operational leverage.

Publication Date: Nov -18

📋 Highlights
  • Revenue Growth:: Q3 2025 revenue reached $634M, the highest in nearly six years, with U.S. revenue at $527M (9% YoY growth).
  • EBITDA Performance:: EBITDA hit $51M (8% of revenue), a marked improvement YoY and maintaining 7%+ EBITDA for 14 consecutive quarters.
  • Merger Synergies:: Anticipated $70M annual cost synergies from the MRC Global merger via operational and supply chain efficiencies within three years.
  • International Expansion:: Q3 international revenue grew 4% sequentially to $54M, with Q4 guidance for high-single-digit growth driven by Middle East and Singapore demand.
  • Free Cash Flow:: Generated $177M in free cash flow in 2025, reflecting 90% EBITDA-to-free-cash-flow conversion and $32M returned to shareholders via buybacks.

Segment Performance

U.S. revenue was $527 million, effectively flat sequentially and an increase of 9% from last year, with U.S. Energy Centers contributing approximately 73% of total U.S. revenue. Canada revenue totaled $53 million, an increase of 10% sequentially, while International revenue was $54 million, up 4% sequentially. The company's midstream business was strong, with customers allocating capital to gathering, transmission, and takeaway projects to meet growing downstream demand.

Merger Update and Synergies

The announced merger with MRC Global is expected to bring together unparalleled access to industry-leading energy, gas utility, and industrial products, services, and solutions. The combined company is expected to generate $70 million of annual cost synergies within three years following the closing. As David Cherechinsky noted, "We see the combined company bringing together unparalleled access to industry-leading energy, gas utility, and industrial products, service, and solutions from both companies to serve a broader and more diversified mix of customers."

Outlook and Valuation

DNOW expects revenue to be in line with second-quarter levels in the U.S. and Canada, with international revenue growing in the high single digits. EBITDA margins are expected to remain in line with historical averages. With a P/E Ratio of 13.46 and an EV/EBITDA of 8.51, the market appears to have priced in a moderate growth trajectory. Analysts estimate revenue growth at 2.8% for next year, which is relatively conservative. The company's strong free cash flow yield of 13.84% and ROE of 8.25% are positives.

Growth Opportunities

The company is excited about growth opportunities in adjacent industrial markets, including midstream, gas utilities, and data centers. DNOW's exposure to RNG, dry gas, and CCUS projects is also growing, and the company sees opportunities for growth in these areas in the future. The merger with MRC Global is expected to enhance DNOW's earnings durability, cash flow, and financial position, and provide a stronger platform for growth.

3. NewsRoom

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AXQ Capital LP Purchases New Stake in DNOW Inc. $DNOW

Nov -25

Source: defenseworld.net

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NOW Deepens Partnership With MSFT: Can it Drive Top-Line Growth?

Nov -21

Source: zacks.com

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Bailard Inc. Reduces Stock Holdings in DNOW Inc. $DNOW

Nov -15

Source: defenseworld.net

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DNOW Completes Combination with MRC Global

Nov -06

Source: businesswire.com

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DNOW Inc. (DNOW) Q3 2025 Earnings Call Transcript

Nov -06

Source: seekingalpha.com

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DNOW (DNOW) Reports Q3 Earnings: What Key Metrics Have to Say

Nov -05

Source: zacks.com

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DNOW (DNOW) Tops Q3 Earnings Estimates

Nov -05

Source: zacks.com

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DNOW Reports Third Quarter 2025 Results

Nov -05

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.09%)

6. Segments

Pumps, Production and Drilling

Expected Growth: 6%

NOW Inc.'s 6% growth in Pumps, Production, and Drilling is driven by increasing demand for oil and gas, rising drilling activities, and growing adoption of digital technologies. Additionally, the company's strategic acquisitions, expanded product offerings, and strong relationships with major operators contribute to its growth momentum.

Valves

Expected Growth: 5%

NOW Inc.'s valve segment growth is driven by increasing demand for oil country tubular goods (OCTG) and line pipe, fueled by rising global energy demand and infrastructure development. Additionally, the company's strategic acquisitions, expanded product offerings, and strong relationships with major oil and gas operators contribute to its growth momentum.

Fittings and Flanges

Expected Growth: 5%

NOW Inc.'s Fittings and Flanges segment growth is driven by increasing demand from shale plays, rising oil prices, and growing investments in midstream infrastructure. Additionally, the company's strategic acquisitions, expanded product offerings, and strong relationships with E&P companies contribute to its 5% growth rate.

Pipe

Expected Growth: 4%

NOW Inc.'s 4% growth is driven by increasing demand for oil country tubular goods (OCTG) and rising drilling activity in North America, coupled with the company's strategic expansion into international markets and its focus on providing value-added services to its customers.

Mill Tool, Maintenance, Repair and Operating, Safety and Other

Expected Growth: 5%

NOW Inc.'s 5% growth is driven by increasing demand for Mill Tool and MRO products in the recovering energy market. Strengthening safety protocols and regulations boost Safety segment sales. The Other segment benefits from growing demand for logistics and supply chain services. Operational efficiency initiatives and strategic acquisitions also contribute to growth.

7. Detailed Products

Drilling and Downhole

Provides drilling and downhole products and services, including drill pipe, tubing, and casing, as well as downhole tools and equipment.

Completions and Production

Offers a range of products and services for well completion and production, including artificial lift systems, valves, and actuators.

Intervention and Stimulation

Provides products and services for well intervention and stimulation, including coiled tubing, wireline, and hydraulic fracturing.

Pipeline and Industrial

Offers a range of products and services for pipeline construction, maintenance, and repair, as well as industrial applications.

Valves, Fittings, and Flanges

Provides a range of valves, fittings, and flanges for use in oil and gas operations, as well as industrial applications.

Measurement and Control

Offers a range of products and services for measurement and control, including flow meters, pressure gauges, and control valves.

8. NOW Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

NOW Inc. operates in the oil and gas industry, which has limited substitutes. However, the increasing focus on renewable energy sources could pose a threat to the company's operations.

Bargaining Power Of Customers

NOW Inc. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's products and services are critical to the operations of its customers, making it difficult for them to switch to alternative suppliers.

Bargaining Power Of Suppliers

NOW Inc. relies on a network of suppliers to provide goods and services. While the company has some bargaining power due to its size and scale, suppliers may still have some leverage, particularly if they provide specialized or critical components.

Threat Of New Entrants

The oil and gas industry has significant barriers to entry, including high capital requirements and complex regulatory frameworks. This makes it difficult for new entrants to enter the market and compete with established players like NOW Inc.

Intensity Of Rivalry

The oil and gas industry is highly competitive, with many established players competing for market share. NOW Inc. faces intense competition from companies like Schlumberger, Halliburton, and Baker Hughes, which could impact its market share and pricing power.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 4.33%
Debt Cost 3.95%
Equity Weight 95.67%
Equity Cost 11.38%
WACC 11.06%
Leverage 4.53%

11. Quality Control: NOW Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Profire Energy

A-Score: 5.6/10

Value: 5.2

Growth: 7.1

Quality: 8.0

Yield: 0.0

Momentum: 9.5

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
Ranger Energy Services

A-Score: 5.6/10

Value: 7.8

Growth: 6.3

Quality: 5.5

Yield: 2.0

Momentum: 7.5

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
NOW

A-Score: 5.2/10

Value: 6.4

Growth: 5.9

Quality: 6.1

Yield: 0.0

Momentum: 7.5

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Select Energy Services

A-Score: 4.6/10

Value: 6.6

Growth: 5.9

Quality: 4.2

Yield: 3.0

Momentum: 4.0

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
U.S. Silica Holdings

A-Score: 4.6/10

Value: 8.0

Growth: 6.9

Quality: 5.5

Yield: 0.0

Momentum: 5.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
RPC

A-Score: 4.5/10

Value: 7.0

Growth: 5.8

Quality: 5.1

Yield: 4.0

Momentum: 1.0

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

13.95$

Current Price

13.95$

Potential

-0.00%

Expected Cash-Flows