NOW (NYSE:DNOW) reported its second-quarter results before the market opened on Wednesday. Revenue and earnings for the oil-field equipment distributor were both hit hard by the continued weakness in the oil market. However, the company has been able to mitigate some of that weakness by snapping up competitors.

A look at the numbers
NOW's second-quarter revenue was $750 million, which was down 13% from the first quarter. However, it came in well above analysts' expectations, beating the consensus estimate by nearly $70 million. Driving this better-than-expected result was the contribution from recent acquisitions, without which revenue would have declined 17% sequentially. However, that decline wasn't as bad as the overall decline in oil and gas activity, as the global rig count plunged 26% from just the prior quarter.

The biggest driver of the company's relative outperformance was the strong contributions from its international segment, which, as the chart below shows, was relatively solid.

 

Revenue

 

 

Segment

2Q15

2Q14

1Q15

United States

 $496

 $662

 $601

Canada

 $89

 $125

 $116

International

 $165

 $165

 $146

Source: Now Press Release.

The sole driver of the international segment was acquisitions, which added $30 million in incremental revenue during the quarter. The new additions helped keep revenue flat year over year, and drove a 13% sequential increase, which helped to mitigate some of the declines elsewhere.

The steepest decline was seen in the company's Canadian segment, as revenue plunged 23% from last quarter, and is down 29% year over year. This is mainly the result of a stunning drop in that country's rig count, which is down 51% during the past year having recently endured a 68% sequential drop. The company was able to outperform that decline thanks to large projects in western Canada, as well as the implementation of new contracts.

Finally, the company's U.S. segment experienced a 17% sequential decline in revenue, while also being off 25% from the year-ago quarter. However, much like the international segment, its results would have been much worse if it hadn't been for the impact of recent acquisitions, without which revenue would have been down 28% year over year. Driving the overall decline was the 51% plunge in the U.S. rig count, which significantly reduced demand for the products that NOW supplies.

Having said all that, while NOW's top line wasn't as bad as feared, its bottom line was worse than expected. The company reported an adjusted net loss, which excludes acquisition and severance-related charges, of $17 million, or $0.16 per share. Not only was that a wider loss than last quarter's $0.02 per-share loss, but it missed estimates by $0.04 per share. The loss would have been even wider if it wasn't for the $28 million in costs the company has pulled out of its business since the fourth quarter of last year.

A look at the outlook
Despite the challenging first half of the year, NOW has accomplished a lot, as the company has taken advantage of the downturn to make a number of strategic acquisitions. Right as the quarter ended, the company announced the acquisition of Odessa Pumps and Equipment, which is a U.S. distributor of pumps and equipment for the oil and gas and municipal and wastewater markets. It's a deal the company subsequently closed last week.

Then yesterday, it announced the acquisition of Challenger Industries, which is a leading U.S. pipe, valve, and fittings supplier to energy companies. Finally, the company recently closed a small acquisition of a Canadian supplier of valves and actuators.

That acquisition-driven growth aside, NOW still faces come stiff headwinds from challenges within the oil industry. CEO Robert Workman was quoted in the press release saying that, "Although we saw some modest growth in rig counts in July, recent oil price declines make the timing of a recovery uncertain." In fact, during the month of July, oil plunged more than 20%, and is now around $45 per barrel. If this price sticks around for a while, it could cause oil companies to further pull back the reins on spending, which would mute NOW's sales.

Investor takeaway
While NOW's revenue was much stronger than expected, its loss widened as oil and gas activity remains weak. With oil prices recently growing weaker, there's still a lot of uncertainly as to when activity will recover. NOW is taking advantage of the situation by making acquisitions that it hopes will really drive strong sales growth when the recovery finally takes hold.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends NOW. The Motley Fool owns shares of NOW. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.