GET DAILY SIGNALSDNOW Inc. (DNOW) Delivers Strong Q3 Cash Flow Despite Modest Revenue Miss
Key Takeaways
- Adjusted earnings per share (EPS) of $0.18 topped the $0.15 consensus estimate by $0.03.
- Revenue of $1.337 billion came in slightly below the roughly $1.36 billion analysts had expected.
- Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) rose to $76 million, or 5.7% of revenue, up $16 million sequentially.
- Operating cash flow reached $120 million — the company's best third quarter since 2015 — as net debt fell to $265 million.
- DNOW repurchased $17 million of stock in the quarter, bringing buybacks over the past three quarters to $92 million.
- For more on DNOW's Major News, Today's Price Move, Price Targets, and Forecasts, explore the dedicated pages.
- Explore Trending AI Robots to see AI-driven trading strategies currently gaining momentum.
Why This Quarter Matters for DNOW
DNOW Inc. is a leading distributor of energy products and industrial supplies serving oil and gas, gas utilities, and adjacent industrial markets. This third quarter represented a key test of the company's post-acquisition integration strategy. After a transformative acquisition roughly doubled its revenue base, investors have been watching closely to see whether DNOW can convert that scale into durable profitability and free cash flow. The report mattered because it offered a clear read on whether margin improvement and working capital efficiency could offset softer organic growth and rising logistics costs. With management also framing a broader 2027 earnings outlook, the quarter carried significance well beyond a single reporting period. I also checked this using Tickeron’s AI Screener to see how the stock compares to others in the industry.
Breaking Down the Q3 Numbers
For the third quarter ended September 30, 2026, DNOW reported revenue of $1.337 billion, up 2.3% sequentially and within management's guided range but slightly below the consensus estimate of roughly $1.36 billion. Adjusted EPS came in at $0.18, beating the $0.15 consensus by $0.03. On a GAAP basis, net income was $26 million, or $0.14 per diluted share, swinging from a $21 million loss in the prior quarter.
Profitability improved meaningfully on a sequential basis. Adjusted gross profit rose to $283 million, or 21.2% of revenue, up from 20.8% in the second quarter. Adjusted EBITDA climbed to $76 million, or 5.7% of revenue, from $60 million in the prior quarter, exceeding the company's own guidance. Selling, general, and administrative expense declined $6 million sequentially to $232 million.
Cash generation was a standout. Operating cash flow reached $120 million and free cash flow $106 million, reflecting better collections and improved inventory turns. Net debt fell by $95 million for the second consecutive quarter to $265 million, lowering the leverage ratio to 1.1 times trailing twelve-month EBITDA.
How the Market Responded
Initial market reaction leaned negative, with shares trading lower as investors focused on the revenue miss and a tempered fourth-quarter outlook, even as the profit and cash-flow figures exceeded expectations. The central tension in the quarter was clear: integration is now producing profits and cash ahead of plan, but organic top-line momentum cooled, and management softened the floor of its 2027 earnings framework. Rising freight, trucking, and diesel costs emerged as a fresh gross-margin headwind with a lagged recovery, adding to investor caution despite the improved bottom-line performance.
Looking Ahead: Guidance and What to Watch
Management guided for a high-single-digit percentage decline in fourth-quarter revenue, with adjusted EBITDA margin expected to step down to roughly 4.5% on a seasonal basis. That softer near-term picture reflects the absence of roughly $24 million in upstream projects that did not repeat from the second quarter, along with about $15 million in international projects that slipped into future periods.
Looking further out, management framed a 2027 adjusted EBITDA scenario of $300 million to $350 million, anchored on the annualized third-quarter run rate — a wider and slightly lower range than commentary in the prior quarter had suggested. On the positive side, the company now expects full-year 2026 operating cash flow to approach $200 million, raised its year-one synergy exit rate to about $32 million, and sees a path to a net cash position by the end of 2027 excluding M&A.
Investors should monitor logistics and freight costs, the pace of international project conversions, and whether LNG and data center-related demand continue to support growth. The balance between margin discipline and top-line momentum will remain the key narrative through the year's final report.
Using AI Tools to Refine My Analysis
In my research process I often turn to Tickeron’s AI Screener to quickly surface comparable names in the energy distribution space and test how DNOW stacks up on fundamentals and technical signals. It helps me cross-check ideas without spending hours on manual filters, and I find the AI-driven pattern and trend insights particularly useful when evaluating post-earnings setups like this one.
Disclaimer
The information on this webpage is provided for general informational and educational purposes only and is not intended as investment advice, a recommendation to purchase or sell any security, or an offer or solicitation related to investments. It does not consider your personal financial situation, goals, or risk profile, and all investing carries inherent risks, including the possibility of losing your entire investment. For more details, please review our full disclaimer.
Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
DNOW's Indicator enters downward trend
The Aroon Indicator for DNOW entered a downward trend on October 12, 2026. Tickeron's A.I.dvisor identified a pattern where the AroonDown red line was above 70 while the AroonUp green line was below 30 for three straight days. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options. A.I.dvisor looked at 137 similar instances where the Aroon Indicator formed such a pattern. In 98 of the 137 cases the stock moved lower. This puts the odds of a downward move at 72%.
Technical Analysis (Indicators)
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on November 04, 2026. You may want to consider selling the stock, shorting the stock, or exploring put options on DNOW as a result. In 62 of 93 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are 67%.
The Moving Average Convergence Divergence Histogram (MACD) for DNOW turned negative on November 04, 2026. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 47 similar instances when the indicator turned negative. In 30 of the 47 cases the stock turned lower in the days that followed. This puts the odds of success at 64%.
DNOW moved below its 50-day moving average on November 04, 2026 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for DNOW crossed bearishly below the 50-day moving average on November 06, 2026. This indicates that the trend has shifted lower and could be considered a sell signal. In 11 of 18 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are 61%.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where DNOW declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 67%.
Bullish Trend Analysis
The RSI Indicator points to a transition from a downward trend to an upward trend -- in cases where DNOW's RSI Indicator exited the oversold zone, 24 of 27 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are 89%.
The Stochastic Oscillator demonstrated that the ticker has stayed in the oversold zone for 1 day, which means it's wise to expect a price bounce in the near future.
Following a +1.65% 3-day Advance, the price is estimated to grow further. Considering data from situations where DNOW advanced for three days, in 232 of 337 cases, the price rose further within the following month. The odds of a continued upward trend are 69%.
DNOW may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Fundamental Analysis (Ratings)
The Tickeron Valuation Rating of 18 (best 1 - 100 worst) indicates that the company is slightly undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (1.146) is normal, around the industry mean (4.173). P/E Ratio (-9.280) is within average values for comparable stocks, (2.286). Projected Growth (PEG Ratio) (0.260) is also within normal values, averaging (2.538). Dividend Yield (0.000) settles around the average of (0.448) among similar stocks. P/S Ratio (0.600) is also within normal values, averaging (3.013).
The Tickeron Profit vs. Risk Rating rating for this company is 52 (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 65, placing this stock slightly better than average.
The Tickeron Price Growth Rating for this company is 61 (best 1 - 100 worst), indicating fairly steady price growth. DNOW’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron SMR rating for this company is 94 (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron PE Growth Rating for this company is 98 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
Advertisement
General Information
a provider of supply chain solutions to the energy industry
Industry ElectronicsDistributors
Advertisement