Now Inc price target raised to $19 from $17 at Stifel on MRC deal

Now Inc (DNOW) announced a definitive agreement to acquire MRC Global (MRC) in an all-stock transaction valued at approximately $1.5 billion, including MRC's net debt, aiming to establish a leading energy and industrial solutions provider. This merger is anticipated to generate $70 million in annual cost synergies within three years and deliver double-digit adjusted EPS accretion in the first year, with 25% accretion by 2026, prompting Stifel to raise DNOW's price target to $19 while maintaining a Buy rating. Despite DNOW's recent Q1 2025 earnings exceeding expectations and its strong financial health, the stock experienced a decline, with the acquisition expected to close in Q4 2025 pending approvals.

Analysis

Now Inc. (DNOW) has announced a definitive all-stock agreement to acquire MRC Global (MRC) for approximately $1.5 billion, including debt, a strategic move to create a leading energy and industrial solutions provider. The transaction is backed by a strong financial case, with management projecting $70 million in annual cost synergies within three years and significant earnings accretion, including a 25% increase to EPS by 2026. In response, Stifel reiterated its 'Buy' rating and raised its price target on DNOW to $19.00 from $17.00. The acquisition is launched from a position of financial strength, as DNOW reportedly holds more cash than debt and maintains a healthy current ratio of 2.32x. This news follows a strong first-quarter 2025 performance where DNOW surpassed expectations with an EPS of $0.22 and revenue of $599 million. However, despite these positive catalysts, the stock has experienced a decline, which the report attributes to market uncertainties and concerns over potential rig count reductions. The merger, unanimously approved by both boards, is expected to close in the fourth quarter of 2025, pending regulatory and shareholder approvals.

Key Decisions for Investors

• The strong financial rationale for the MRC acquisition, including significant EPS accretion and cost synergies, suggests the recent stock price weakness may present a compelling entry point for long-term investors.
• Investors should closely monitor the progress of the merger through regulatory and shareholder approvals, as the Q4 2025 closing timeline is a critical catalyst for unlocking the projected financial benefits and a potential stock re-rating.
• Despite positive company-specific developments, positions in DNOW should be managed with an awareness of its exposure to broader energy market sentiment, particularly concerns over rig count reductions which have recently pressured the stock.