What Happened?
Shares of energy and industrial distributor DistributionNOW (NYSE:DNOW) fell 8.1% in the morning session after the company reported third-quarter 2025 financial results that showed a significant drop in profitability, sparking investor concern.
Although the company's earnings per share of $0.26 surpassed analyst forecasts, other key figures pointed to weakness. Revenue came in at $634 million, slightly short of the anticipated $635.13 million. More significantly, the company's net profit margin fell sharply to 3.4% from 9.5% in the same period of the previous year. Additionally, the company's free cash flow margin also declined, dropping to 6.2% from 11.9% in the same quarter of the previous year. These signs of contracting profitability appeared to outweigh the positive earnings surprise for investors.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy DistributionNOW? Access our full analysis report here.
What Is The Market Telling Us
DistributionNOW’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 27 days ago when the stock dropped 4.4% on the news that the U.S. threatened to impose "massive increases" to tariffs on China in response to new export controls from Beijing. The potential countermeasures follow China's decision to place new restrictions on the export of strategic minerals and related products, including rare earths, which are critical for the defense, semiconductor, and manufacturing industries. This escalation in the economic competition between the two largest global economies is fueling investor anxiety. The new tariff threats raise concerns about disruptions to global supply chains, increased material costs for manufacturers, and a potential drag on an already sluggish economy. Industrial companies are particularly sensitive to these developments as they are often cyclical and heavily reliant on international trade.
DistributionNOW is up 4.4% since the beginning of the year, but at $13.52 per share, it is still trading 23.2% below its 52-week high of $17.59 from February 2025. Investors who bought $1,000 worth of DistributionNOW’s shares 5 years ago would now be looking at an investment worth $2,932.
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