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Investing.com - Stifel has reduced its price target on Now Inc (NYSE:DNOW) to $18.00 from $19.00 while maintaining a Buy rating on the stock. According to InvestingPro analysis, NOW Inc currently appears undervalued, with the company maintaining a "GREAT" financial health score of 3.07 out of 5.
The price target adjustment comes amid deteriorating sentiment in the oil distribution sector, with Stifel noting that recent channel checks revealed broadly negative expectations among distributors due to lower oil prices. Despite market challenges, NOW Inc maintains strong fundamentals with a healthy current ratio of 2.32 and zero debt concerns, as revealed in InvestingPro’s comprehensive analysis.
Stifel cited several concerning factors in its analysis, including a negative 12-month industry outlook, declining rig count, reduced drilling and completion activity, and West Texas Intermediate crude trading at lower levels of approximately $66 per barrel.
Despite these headwinds, Stifel pointed out that Now Inc’s customer base consists primarily of larger independent oil companies that have maintained capital discipline, which should help limit downside to capital spending.
The firm also noted that expected growth in the midstream segment could partially offset the near-term challenges in oilfield activity, with continued investments likely needed for takeaway capacity and liquefied natural gas growth.
In other recent news, Now Inc. reported its Q1 2025 earnings, surpassing expectations with an earnings per share of $0.22 against a forecast of $0.18, and revenue of $599 million, exceeding projections of $587.75 million. Despite these results, the company’s stock fell, reflecting investor concerns over market uncertainties. In merger developments, Now Inc. announced an all-stock transaction to acquire MRC Global (NYSE:MRC), valued at approximately $1.5 billion, including MRC Global’s net debt. This merger aims to create a global energy and industrial solutions provider with significant cost synergies expected by the third year after closing. S&P Global Ratings placed MRC Global’s ratings on CreditWatch with positive implications due to the merger, anticipating potential benefits from a broader market reach and product range. Stifel raised its price target for Now Inc. from $17 to $19, maintaining a Buy rating, citing confidence in the strategic benefits of the merger. The merger, subject to regulatory approval, is expected to close in the fourth quarter of 2025.
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