Oil price volatility returned during the second quarter, which affected demand for the equipment NOW Inc (DNOW -1.68%) distributes to customers. That headwind put some pressure on the company's financial results, which backtracked compared to the year-ago period. However, the company still believes it can achieve its 2019 forecast.
NOW results: The raw numbers
|
Metric |
Q2 2019 |
Q2 2018 |
Change |
|---|---|---|---|
|
Revenue |
$776 million |
$777 million |
(0.1%) |
|
Adjusted net Income |
$10 million |
$10 million |
0% |
|
Adjusted EPS |
$0.09 |
$0.10 |
(10%) |
Data source: NOW.
What happened with NOW this quarter?
The U.S. was surprisingly solid:
- The oilfield equipment distribution company tallied $605 million in revenue from U.S. customers during the quarter. That's up by around 1% versus last year's second quarter as well as sequentially even though the U.S. rig count has dropped 5% in the past year. The main driver was its U.S. process solutions business, where revenue surged 17% sequentially and 36% year over year. Higher activity levels across many shale plays drove demand for tank batteries that process production from wells.
- Revenue from customers in Canada was $74 million, which was down by 1% year over year and 14% from the first quarter. Seasonality was the main driver of the sequential decline, while continued pipeline issues drove the weakness compared to last year.
- Other international revenue came in at $97 million. That's down 5% from last year and 2% from the first quarter. The company experienced some weakness in the Middle East as projects were into the third quarter while Asia was under pressure thanks to customer credit concerns.
- The slightly weaker sales put pressure on earnings, which also declined slightly during the quarter.
Image source: Getty Images.
What management had to say
CEO Robert Workman commented on the company's results, stating:
We are pleased by the performance of our U.S. Process Solutions team as they exceeded pre-acquisition second quarter 2014 revenue levels, back when U.S. rig counts were nearly double the levels we're seeing today. This was achieved by leveraging our full suite of products and infrastructure throughout the major shale plays and by bundling opportunities through our U.S. Energy Centers and U.S. Supply Chain Services channels.
NOW was able to mitigate a large portion of the volatility-related headwinds during the quarter thanks to the robust results of its U.S. process solutions business. The company did this by leveraging its existing customer relationships to cross-sell more products and services.
The company added more fuel to that business unit's growth engine by making two small acquisitions late in the quarter. Workman noted that "one expanded our territory with a manufacturing supplier and another addresses choke points for our production equipment and positioned our process packaging capabilities closer to the Eagle Ford, Permian and downstream markets."
Looking forward
CEO Robert Workman commented on what lies ahead by saying: "even though the market is softer now than we originally anticipated when we first gave guidance for 2019, our revenue outlook remains unchanged." As such, the company still "believe[s] we can deliver 2019 year-over-year revenue levels near our 2018 results to down slightly in the low single-digit percentage range."
