What happened

Shares of MRC Global (NYSE:MRC) rocketed more than 23% by 1:30 p.m. EDT on Friday. Driving the rally in the leading PVF distributor to the energy industry was its expectation-beating third-quarter report.

So what

MRC Global recorded $942 million of sales during the third quarter. While that was down 4% sequentially and 12% year over year, it came in about $3.6 million ahead of the analysts' consensus. Meanwhile, the company reported $13 million, or $0.16 per share, of adjusted net income, which beat expectations by $0.03 per share.

An oil worker turning a valve

Image source: Getty Images.

On the one hand, MRC Global said it battled against "progressively weaker market conditions" during the quarter -- due to lower oil prices -- and "unusually low customer spending patterns." However, it offset those challenges by controlling costs, which helped boost its margins. That enabled it to generate free cash, which it has used to repay debt and buy back its stock, including $13 million of repurchases during the quarter.

MRC Global's cost savings initiatives should continue to pay dividends in the coming quarters. In the company's view, it will generate at least $200 million in cash from operations this year. After producing $126 million in cash through the third quarter, that outlook puts it on track to generate around $75 million in cash during the fourth quarter. That will give it more money to bolster its balance sheet and buy back shares.

Now what

MRC Global is doing what it can to navigate through the challenging conditions in the oil market. By cutting costs, it's able to generate more cash, which is giving it the funds to return to investors through its buyback program. That puts it in a better position to create value for its shareholders despite the tough operating environment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.