Energy products manufacturer DNOW (DNOW 0.81%) had quite the forgettable Friday on the stock exchange. The specialized industrial company's shares fell by more than 19% in value, due largely to quarterly earnings that missed on both the top and bottom lines.
Integration challenges
That morning, DNOW took the wraps off its fourth quarter and full-year 2025 results. These showed that revenue nearly doubled year-over-year, increasing to $959 million from $571 million, although much of the increase was due to the company's absorption of pipes, valves, and fittings distributor MRC Global, the acquisition of which closed last November.
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On the bottom line, DNOW's net income not in accordance with generally accepted accounting principles (GAAP) landed at $23 million, or $0.15 per share. That compared unfavorably to the year-ago quarter, however, as that period's profit was $27 million.
Despite the ballooning top line, DNOW missed the analyst consensus estimates for both figures. Those pundits were collectively modeling almost $988 million for revenue, and a per-share, non-GAAP (adjusted) net income of $0.16.
Addressing investor concerns about difficulties with a legacy enterprise resource planning (ERP) system burdening MRC Global, DNOW quoted CEO David Cerechinsky as saying that "While these complexities have created near-term obstacles, we are actively addressing them and remain focused on positioning the business for long-term growth."
NYSE: DNOW
Key Data Points
Wait and see?
While it's understandable that investors are concerned about whether and how those "complexities" will be ironed out, I don't think they ruin the prospects of the recently enlarged DNOW (besides, the market has known about MRC's software issues for some time).
That being said, all indications are that it's a thorny issue, and the smooth integration of MRC likely depends -- at least to a degree -- on resolving it. I'd hold off on investing in DNOW stock until we see some tangible progress on the situation.
