The awful oil market in the fourth quarter had a noticeable impact on NOW Inc's (NYSE:DNOW) results as it is one of the largest distributors of parts for the industry. The company's sales slipped in the quarter while its earnings were cut in half. However, those results were out of the company's control as the price of oil fell dramatically in the quarter causing the company's customers to cautiously hold back spending.

Drilling down into the numbers
NOW Inc's revenue slipped 6% over the third quarter to just slightly over a $1 billion. That missed analysts' estimates by about $50 million. 

The impact from the weak oil market was most clearly seen in sagging sales in the U.S, which were down 9.2% from just last quarter to $697 million. While some of this was the result of normal seasonal business decline, as its sales were up 0.4% year-over-year, the company noted that "negative customer outlook" due to the sharp drop in the price of oil had a real impact on sales during the quarter.

Sales outside of the U.S. where mixed as its sales in Canada were up 4% to $180 million while its other international sales slipped 1.3% to $147 million. The company noted that its Canadian sales were fueled by a seasonal uptick while it also saw strong sequential revenue growth in the Middle East. However, both segments saw big revenue declines compared to the same quarter of last year as Canada was down 7.7% while its other international revenue was down 13.5%.

These sales declines led to much weaker than expected earnings. For the fourth-quarter NOW Inc's net income was just $16 million, or $0.14 per share. That was less than half of what analysts were expecting as the company missed by $0.17 per share. Earnings were also about half of the $32 million, or $0.30 per share the company earned just last quarter. In addition to its sagging sales the company was also affected on the margin side as its EBITDA margin as a percentage of sales slipped from 5% last quarter to just 3.1% this quarter.

A look ahead
Right now there's an awful lot of uncertainty in the oil market due to the unexpected dramatic plunge in prices over the past few months. NOW Inc CEO Robert Workman noted in the company's press release that the timing of a recovery in the oil market is uncertain, which is why his company is going to take a "measured approach to successfully navigate the next few quarters." What this suggests is that the company is expecting the next couple of quarters to be weak.

That being said, with challenges comes opportunity and that's what the company sees right now. Workman noted that the company has a healthy balance sheet, which has it well positioned to pursue strategic opportunities that it's seeing on the horizon. He said the company will be "disciplined, but nimble" as it proceeds with acquisition opportunities that will enable it to execute on its long-term growth strategy. So, suffice it to say that 2015 could be a very busy year for the company as it goes on the offensive to take advantage of the current market conditions.

Investor takeaway
The fourth-quarter is one that energy-related companies would like to forget. We saw one of the most dramatic sell-offs in the price of oil in recent memory, which forced oil companies to take a cautious approach to the future. However, these issues tend to work themselves out over time, which is why NOW Inc is preparing to take advantage of the downside in the cycle to position itself to reap the rewards that come when the cycle turns up.