What Happened?
Shares of energy and industrial distributor DNOW (NYSE: DNOW) fell 19.1% in the morning session after the company reported disappointing fourth-quarter 2025 financial results, which included a significant loss and missed Wall Street's expectations.
For the quarter, DNOW posted revenue of $959 million, which fell short of analysts' estimates. The results were particularly weak on the bottom line, with the company reporting a GAAP loss of $0.95 per share, a significant miss compared to the profit of $0.15 per share that analysts had anticipated. The quarter's performance, which came after the company's recent all-stock acquisition of MRC Global, was also marked by a sharp decline in profitability. Adding to investor concerns, DNOW's operating margin fell to negative 17.7%, a steep drop from the positive 5.1% margin recorded in the same period of the previous year.
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What Is The Market Telling Us
DNOW’s shares are quite volatile and have had 16 moves greater than 5% over the last year. But moves this big are rare even for DNOW and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock gained 9.8% on the news that the company announced it will merge with MRC Global in an all-stock transaction.
The deal will create a leading energy and industrial solutions provider with a combined enterprise value of approximately $3.0 billion. Under the terms of the agreement, MRC Global shareholders will receive 0.9489 shares of DNOW common stock for each share of MRC Global they own. Upon closing, DNOW shareholders will own approximately 56.5% of the combined company, with MRC Global shareholders owning the remaining 43.5%. The merger is expected to generate significant value for shareholders, with an estimated $70 million in annual cost savings within three years. The combination is also projected to be accretive to adjusted earnings per share in the double-digits within the first year after the deal is finalized. This strategic move combines the complementary footprints of both companies across key energy and industrial centers in the United States.
DNOW is flat since the beginning of the year, and at $13.29 per share, it is trading 24.1% below its 52-week high of $17.50 from February 2025. Investors who bought $1,000 worth of DNOW’s shares 5 years ago would now be looking at an investment worth $1,266.
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