Here's Why NOW Inc's Stock Is Sinking Today

Markets Motley Fool

What happened

Continue Reading Below

Shares of NOW Inc. (NYSE: DNOW) slumped on Wednesday and were down more than 10% by 10:30 a.m. EDT. Driving the decline was the company's poorly received third-quarter results.

So what

NOW's financial results continued their slow recovery. Revenue climbed 34% versus last year's third quarter to $679 million and was 7.1% higher than in the second quarter. That said, analysts were expecting a bit more as the company missed the consensus estimate by about $4.6 million. However, it did meet expectations on the bottom line, though the company still reported an adjusted net loss of $0.03 per share. That was an improvement from both last quarter and the year-ago period. Further, the company posted $5 million in EBITDA, which was the first time it reported positive underlying earnings in quite a while.

CEO Robert Workman stated in the earnings release that he was "pleased with the earnings growth our team produced this quarter," which the company achieved by distributing higher margin products, capturing new business, and keeping a lid on costs. That said, the near-term outlook isn't all that rosy at the moment, with Workman noting that weaker oil prices in the third quarter caused the rig count to soften. That's causing a pullback in industry spending levels, which could impact future results. Though, Workman stated that "we believe consistent execution on improving our core operations, coupled with operators ramping up completions, will enable positive earnings momentum."

Now what

Continue Reading Below

While the oil industry is recovering, it's coming in fits and starts. That's evident by the slump in crude prices into the $40s during the summer, which is causing a slowdown in industry activity levels. Further, the pain of that decline has many drillers holding back now that oil has recovered back into the mid-$50s. Because of that, it doesn't appear as if there will be a significant rebound in activity in the near-term, which could slow NOW's recovery.

10 stocks we like better than NOW
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and NOW wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of October 9, 2017

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NOW. The Motley Fool has a disclosure policy.