DNOW (DNOW -0.34%) easily beat analyst expectations and generated a lot more cash than the company had originally predicted. Investors are cheering the results, sending shares of the industrial-products company up 19% as of 2:30 p.m. ET.
Strong results energizing the stock
DNOW is a supplier of equipment and services to energy and industrial markets. It offers a wide range of air compressors, welding equipment, power generation equipment, and pumps. The company was spun off from what was then known as National Oilwell Varco (now NOV) in 2014 and has used a series of acquisitions in the years since then to build its product portfolio.
The company's most recent quarter should put it on a lot of radar screens. DNOW earned $0.22 per share on revenue of $555 million, easily surpassing Wall Street estimates of $0.16 per share on $540 million in sales. It also generated $171 million in free cash flow for the year, more than twice the amount it guided for in February 2023.
"I am excited by our strong fourth-quarter finish, capping off another stellar year," CEO David Cherechinsky said in a statement. "In 2023, revenues grew $185 million, or 9%, while generating $184 million in EBITDA [earnings before interest, taxes, depreciation, and amortization] excluding other costs, a record performance since becoming a public company."
Is DNOW a buy after its strong results?
This company at its heart is an oilfield services company, and its results are tied to the fortunes of commodity prices. Coming into earnings, the stock had gone nowhere in the past five years, a time when energy giant ExxonMobil doubled.
The business is running well now, but there's little in recent history to suggest that this quarterly surge will lead to a sustained period of outperformance. Investors intrigued by these results should exercise caution before buying in on a big up day.