Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why NOW Stock Is Rallying Today

By Matthew DiLallo - Nov 6, 2019 at 3:37PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The oilfield-equipment distribution company pleased investors.

What happened

Shares of NOW ( DNOW 3.06% ) jumped more than 11% by 3 p.m. EST on Wednesday. The main factor driving the rally of the equipment distributor, which is focused on the energy industry, was its third-quarter earnings report.

So what

On the one hand, the continued challenges in the oil and gas market hurt NOW's results as its revenue slumped 8.6% year over year to $715 million, falling about $13 million short of expectations. Adjusted net income, however, came in at $9 million, or $0.08 per share, which is $0.01 per share ahead of the consensus estimate. Driving that stronger-than-expected earnings result was the company's efforts to reduce costs.

An oil pump and storage tanks.

Image source: Getty Images.

Those initiatives also enabled NOW to generate $101 million in cash flow from operating activities during the quarter, including $97 million in free cash. That pushed its cash position up to $113 million against no long-term debt. 

The company's cash-rich balance sheet gives it the flexibility to navigate through the current market conditions. It will need it, given that they "have become more challenging as we close out 2019," according to comments by interim CEO Dick Alario in the earnings release.

Now what

The company worked hard during the third quarter to drive down costs to boost its earnings. That allowed it to generate strong free cash flow, which enabled it to become debt-free in the quarter. Because of that, it's in a strong position to not only continue navigating the challenging oil market but also capture opportunities to expand through additional acquisitions.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NOW Inc. Stock Quote
NOW Inc.
$8.77 (3.06%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/08/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.