DNOW Earnings Recap
Beat 5 of last 6 quarters
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DNOW's record midstream revenue and strong gas utility growth underscore the accelerating buildout of natural gas infrastructure, LNG, and power generation tied to data center demand. The company's expanding data center exposure (forecast $40–50 million in 2026) and Process Solutions strength position it as a direct beneficiary of AI-driven power and cooling infrastructure investment.
DNOW delivered a strong sequential rebound in Q2 2026, its first full quarter as a combined entity with MRC Global. Revenue of $1.3 billion beat guidance, driven by 13% U.S. growth, with midstream, gas utilities, and upstream all posting strong sequential gains. Adjusted EBITDA rose 54% sequentially to $60 million, and cash flow from operations hit a record $133 million, aided by a 7-day DSO improvement and $131 million inventory reduction. The company continued its U.S. ERP conversion, transitioning its 17th MRC location to SAP, and repurchased $25 million of shares while reducing net debt by $95 million.
Management raised full-year 2026 revenue guidance to approximately $5.0–5.1 billion (from prior ~$4.9 billion) and lifted EBITDA margin guidance to approach 4.5% (from prior ~4%). For Q3, they expect sequential revenue growth in the low-to-mid single digits and EBITDA margin in the 5%–5.5% range. They reaffirmed the $70 million annualized synergy target by year 3 and raised year-1 exit rate synergies to ~$30 million. They expect continued revenue recapture in upstream, midstream, and gas utilities, with downstream improving into the turnaround season. They also guided to further working capital gains of $25–50 million each from inventory and receivables in the back half, and expressed increased confidence in a ~$350 million EBITDA run-rate for 2027 (not formal guidance).
“We are seeing clear evidence that the combined organization is winning in the market by bringing together customer relationships, broader product availability, best practices and stronger execution discipline.”
on Merger momentum
“We expect sequential third quarter growth in the U.S. as we make additional progress on executing on our integration plan, recover the revenue we want and continue our path to optimize the MRC Global U.S. ERP.”
on Q3 outlook
“We see that $350 million as plausible. And our teams are focused on that target.”
on 2027 EBITDA target
Can you speak to additional working capital gains that could be achieved over the coming quarters or so?
Management expects to reduce inventory by another $25–50 million during the rest of the year, and additional receivables reductions primarily in Q4 as seasonal revenue declines, potentially another $25–50 million plus earnings. They noted CapEx should remain similar quarter-on-quarter.
Could you provide an update on how the MRC platform and the ERP system is performing? Are you seeing improved performance in the system? Are you seeing improved service levels to customers?
Management cited widespread performance improvements in picking, paperwork processing, and data analysis. They noted speed gains over the last 90 days and that the system is now supporting consistent daily operations, with focus shifting from recovery to business enablement.
I was just wondering if you could talk a little bit about the full year guide. It seems like it would imply a bit of a decline in 4Q, a decent sized decline. Just wondering if you guys are kind of just anticipating seasonality there...
Management confirmed they expect a seasonal Q4 decline, citing historical patterns of 6–8% for DNOW and ~10% for MRC (13% for gas utilities). They modeled a slightly better-than-historical decline, but expect seasonality to weigh on Q4 despite continued market share gains and recovery efforts.