DNOW Inc. Navigates Volatile Markets with Strong Q1 Earnings Beat

DNOW Inc. (DNOW) delivered a solid performance in Q1 2025, reporting revenue of $599 million, a 5% sequential increase and a $11.8 million beat against the FactSet consensus of $587.2 million. The Houston-based industrial supplier also highlighted strategic moves, including a regional acquisition and inventory expansion, even as it faces headwinds from falling oil prices and trade disruptions. Here’s a breakdown of what investors should know.

Key Financial Highlights

The quarter’s results underscore DNOW’s resilience in a challenging market:
- Net Income: $22 million ($0.20 per share) under GAAP, with non-GAAP EPS of $0.22.
- EBITDA: $46 million (7.7% of revenue), the second-highest first-quarter EBITDA in company history.
- Cash Position: $219 million, with zero long-term debt and total liquidity of $567 million.

Strategic Moves to Watch

DNOW is positioning itself for growth through both organic and inorganic means:
1. Acquisition of Natron International: Completed in April 2025, this $13 million deal expands DNOW’s electrical supply capabilities in Asia-Pacific under the MacLean International brand. The move targets renewable energy and infrastructure markets, a sector expected to grow as global energy transitions accelerate.
2. Inventory Investment: The company added $33 million to its inventory, despite using $16 million in operating cash. CEO David Cherechinsky called this a “strategic bet” to capitalize on future demand, particularly in decarbonization and energy transition projects.
3. Share Buybacks: DNOW repurchased $8 million in stock during Q1, part of a $160 million authorized program. The buybacks signal confidence in the company’s cash flow and undervalued stock.

Stock Performance: Strong YTD Gains, But Post-Earnings Volatility

DNOW’s stock had surged 23.2% year-to-date through May 7, outperforming the S&P 500’s 4.7% decline. However, shares fell 8.55% on the day of the earnings release to close at $14.66, reflecting investor caution. Analysts cited concerns about macroeconomic risks, including declining oil prices and trade tensions.

Analyst Takeaways and Risks

• Analyst Ratings: A “Hold” consensus (Zacks Rank #3) reflects mixed sentiment. While DNOW’s cash position and strategic moves are praised, the Manufacturing - General Industrial sector it operates in ranks in the bottom 37% of all Zacks industries, weighing on sentiment.
• Price Target: The average analyst target of $19.00 suggests potential upside, but risks like oil price volatility and trade disruptions could delay gains.

Why DNOW Still Attracts Investors

• Cash Flexibility: With $219 million in cash and no debt, DNOW has the financial firepower to pursue acquisitions, buybacks, or weather downturns.
• Growth Markets: Its focus on renewables and energy transition aligns with long-term trends. The International Energy Agency estimates global renewable capacity will grow by 2,400 GW by 2030, creating demand for DNOW’s industrial supplies.
• Operational Discipline: Despite inventory investments, DNOW maintained a 7.7% EBITDA margin, showing cost control in a tough quarter.

Conclusion: A Stock to Monitor in Energy Transition Plays

DNOW’s Q1 results highlight its ability to grow revenue and manage cash in a volatile environment. While near-term risks like oil prices and trade tensions remain, the company’s strategic bets—such as its Asia-Pacific expansion and inventory buildup—position it well for the energy transition boom.

Investors should watch for two key catalysts:
1. Execution on Acquisitions: The Natron deal’s impact on Asia-Pacific revenue will be critical.
2. Inventory Payoff: If the $33 million invested in stock leads to higher sales in Q2 or beyond, margins could expand further.

With a 13.7% year-to-date gain still on the table and a $19 price target, DNOW offers upside potential for those willing to bet on its industrial resilience and strategic vision. However, the stock’s sensitivity to oil prices means investors should pair this with broader energy market analysis.

In short, DNOW isn’t just surviving—it’s laying the groundwork to thrive as the energy landscape evolves.