DNOW Q3 Deep Dive: MRC Global Merger and Midstream Expansion Shape Outlook

Energy and industrial distributor DistributionNOW (NYSE:DNOW) 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).

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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