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Energy and industrial distributor DistributionNOW met Wall Streets revenue expectations in Q3 CY2025, with sales up 4.6% year on year to $634 million. Its non-GAAP profit of $0.26 per share was 11.4% above analysts’ consensus estimates.

Is now the time to buy DNOW? Find out in our full research report (it’s free for active Edge members).

DistributionNOW (DNOW) Q3 CY2025 Highlights:

• Revenue: $634 million vs analyst estimates of $634.1 million (4.6% year-on-year growth, in line)
• Adjusted EPS: $0.26 vs analyst estimates of $0.23 (11.4% beat)
• Adjusted EBITDA: $51 million vs analyst estimates of $49.5 million (8% margin, 3% beat)
• Operating Margin: 5.2%, up from 3.8% in the same quarter last year
• Market Capitalization: $1.53 billion

StockStory’s Take

DistributionNOW’s third quarter results reflected steady execution in a subdued energy market, with management attributing performance to disciplined cost control, operational leverage, and targeted customer focus. CEO David Cherechinsky noted the company’s “solutions-oriented approach” and highlighted growth in midstream and process solutions, along with efficient working capital management and improved inventory turns. Management acknowledged ongoing competitive pressure in core U.S. markets and cited customer consolidation as an industry headwind.

Looking forward, management believes the pending merger with MRC Global will be a key catalyst, aiming to unlock $70 million in annual cost synergies and broaden the company’s product reach. Cherechinsky described the integration as an opportunity to “serve a broader and more diversified mix of customers,” supported by a leadership team with deep industry experience. However, he cautioned that market volatility, customer consolidation, and geopolitical uncertainties, including tariffs and OPEC+ policy shifts, could impact the pace of growth.

Key Insights from Management’s Remarks

Management pointed to midstream strength, digital tool adoption, and water management solutions as significant contributors to the quarter’s results, while also emphasizing strategic progress ahead of the MRC Global merger.

• Midstream demand drives growth: The company benefited from increased activity in gathering and transmission projects, particularly as LNG export demand and power generation requirements created new opportunities for pipe, valve, and fitting sales. Midstream accounted for 24% of overall revenue, with notable project wins in pipeline infrastructure for natural gas distribution to data centers and power plants.
• Product innovation in water management: DistributionNOW expanded its Flex Flow and Trojan rental offerings, addressing rising needs for higher-horsepower pumps and automation in produced water handling. The company also secured orders for equipment targeting the CO2 sequestration and carbon capture, utilization, and storage (CCUS) markets, reflecting customer interest in enhanced oil recovery and environmental compliance.
• EcoVapor product line progress: Management highlighted the development and deployment of new gas treating solutions, including the O2E 2000 for landfill gas and the DryOxo unit for renewable natural gas (RNG) applications. These additions broadened the company’s reach into landfill, agricultural, and biogas markets, supporting future revenue diversification.
• DigitalNOW platform adoption: The company’s digital analytics tools continued to gain traction, enabling large customers to optimize inventory management and supply chain planning. Management believes these tools enhance customer satisfaction and create operational efficiencies, potentially leading to higher margins and retention.
• Merger integration readiness: Ahead of the MRC Global merger, the company is focused on talent retention, aligning sales teams, and leveraging complementary technology stacks. Management expects the combined entity to benefit from MRC’s new enterprise resource planning (ERP) system, which may improve inventory movement, pricing, and operational visibility.

Drivers of Future Performance

DistributionNOW expects the integration with MRC Global, midstream expansion, and continued digital adoption to shape results in the coming quarters, but notes macro uncertainty and competitive intensity as ongoing risks.

• Merger execution and synergy capture: Management is prioritizing a smooth integration with MRC Global, targeting $70 million in annual cost synergies from combined operations, IT efficiencies, and supply chain optimization. Leadership emphasized that retaining top talent and maintaining customer service levels are critical to realizing these benefits without significant disruption.
• Midstream and energy transition opportunities: The company expects continued investment in LNG, power transmission, and CCUS projects to drive demand for its core products and services. Cherechinsky highlighted the potential for market share gains as customers seek larger, more centralized infrastructure, and stressed the company’s ability to supply fabricated equipment for data center and power generation buildouts.
• Margin management amid competition: Management remains focused on higher-margin products and services, leveraging its solutions portfolio and acquisitions to offset pricing pressure in a “hypercompetitive” environment. However, they acknowledged that end-market growth—especially in U.S. onshore activity—will be key to sustaining current margin performance.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts are closely watching (1) the pace and quality of the MRC Global integration, especially efforts to retain key personnel and achieve targeted cost synergies; (2) signs of sustained momentum in midstream and LNG-related capital spending; and (3) the adoption rate of digital tools and new product lines, such as EcoVapor and Flex Flow. Developments in energy transition projects and progress on inventory optimization will also be important indicators.

DistributionNOW currently trades at $14.56, in line with $14.62 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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Fluid and gas handling company MRC missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 12.1% year on year to $678 million. Its non-GAAP profit of $0.13 per share was 60.6% below analysts’ consensus estimates.

Is now the time to buy MRC Global? Find out by accessing our full research report, it’s free for active Edge members.

MRC Global (MRC) Q3 CY2025 Highlights:

• Revenue: $678 million vs analyst estimates of $848.5 million (12.1% year-on-year decline, 20.1% miss)
• Adjusted EPS: $0.13 vs analyst expectations of $0.33 (60.6% miss)
• Adjusted EBITDA: $36 million vs analyst estimates of $61.3 million (5.3% margin, 41.3% miss)
• Operating Margin: -0.4%, down from 4.8% in the same quarter last year
• Free Cash Flow was -$37 million, down from $87 million in the same quarter last year
• Backlog: $571 million at quarter end, down 1.6% year on year
• Market Capitalization: $1.18 billion

Rob Saltiel, MRC Global’s President and CEO, commented, “The implementation of our new enterprise resource planning (ERP) system in our U.S. segment encountered significant challenges that adversely impacted our revenues, profitability, and cash flows, during our third quarter. We deployed extensive resources to ensure that customer service levels were maintained and that business operations could function as we addressed the system issues. I am pleased to report that our financial and operations performance improved dramatically by the end of our third quarter and that this more normalized performance has continued throughout the month of October. We greatly appreciate the patience of our customers and the hard work by the entire MRC Global team during this system transition.”

Company Overview

Producing bomb casings and tracks for vehicles during WWII, MRC offers pipes, valves, and fitting products for various industries.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, MRC Global struggled to consistently increase demand as its $2.85 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and suggests it’s a low quality business.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. MRC Global’s recent performance shows its demand remained suppressed as its revenue has declined by 9.9% annually over the last two years.

MRC Global also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. MRC Global’s backlog reached $571 million in the latest quarter and averaged 1.6% year-on-year declines over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for MRC Global’s products and services but raises concerns about capacity constraints.

This quarter, MRC Global missed Wall Street’s estimates and reported a rather uninspiring 12.1% year-on-year revenue decline, generating $678 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 15.1% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will fuel better top-line performance.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

MRC Global was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.3% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, MRC Global’s operating margin rose by 1.7 percentage points over the last five years.

In Q3, MRC Global’s breakeven margin was down 5.2 percentage points year on year. Conversely, its gross margin actually rose, so we can assume its recent inefficiencies were driven by increased operating expenses like marketing, R&D, and administrative overhead.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

MRC Global’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for MRC Global, its EPS declined by more than its revenue over the last two years, dropping 39.7%. This tells us the company struggled to adjust to shrinking demand.

Diving into the nuances of MRC Global’s earnings can give us a better understanding of its performance. MRC Global’s operating margin has declined over the last two years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, MRC Global reported adjusted EPS of $0.13, down from $0.22 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects MRC Global’s full-year EPS of $0.44 to grow 178%.

Key Takeaways from MRC Global’s Q3 Results

We struggled to find many positives in these results. Its Valves revenue missed and its revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. 

Is MRC Global an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.