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Cactus, Inc. (WHD) Down 13.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Cactus, Inc. (WHD). Shares have lost about 13.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cactus, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Cactus’ Q3 Earnings Meet Estimates, Revenues Miss

Cactus reported third-quarter adjusted earnings of 19 cents per share, meeting the Zacks Consensus Estimate. The bottom line increased from the year-ago quarter’s 13 cents.

Total quarterly revenues of $115.4 million missed the Zacks Consensus Estimate of $117 million. However, the top line improved from the year-ago quarter’s $59.8 million.

The third-quarter results were driven by higher sales of wellhead and production-related equipment, backed by improved U.S. drilling activities. The positives were partially offset by higher costs and expenses.

Dividend

Cactus’ board declared a quarterly cash dividend of 10 cents per share. The dividend will be paid out on Dec 16, 2021, to shareholders of record as of Nov 29, 2021. In the third quarter alone, it paid out $7.6 million through dividends.

Business Segments

From the Product business, Cactus generated revenues of $74.8 million, increasing from $35.9 million in the September-end quarter of 2020. Gross profit from the business unit was recorded at $25.1 million, up from the year-ago quarter’s $16 million. The segment was supported by higher U.S. drilling activity, which triggered sales of wellhead and production-related equipment. Also, production tree sales witnessed a jump in the quarter.

Cactus’s Rental revenues were recorded at $15.3 million, up from $9.9 million in the year-ago quarter. Gross income from the Rental unit increased to $2 million from the year-ago profit of $0.2 million. The segment was supported by higher customer completion activity and revenue generated in the Middle East.

From the Field Service and Other business segment, Cactus generated revenues of $25.3 million, up from $14.1 million in the year-ago quarter. Gross profit from the business unit was $5.8 million, up from the year-ago quarter’s $4.7 million. Higher client activities resulted in increased billable hours, thereby, boosting the segment.

Expenses

The cost of product revenues was recorded at $49.7 million, which jumped from $19.9 million in the year-ago quarter. Also, the cost of rental revenues was reported at $13.3 million, up from $9.6 million in the September-end quarter of 2020. The cost of field service and other revenues increased to $19.5 million from $9.3 million a year ago. As such, total expenses jumped to $94.6 million from the year-ago level of $47.2 million.

Capex and Cash Flow

Cactus’s third-quarter 2021 cash investment amount was recorded at $4.1 million. For the reported quarter, operating cash flow was $8.9 million.

Balance Sheet

At the third quarter-end, Cactus had cash and cash equivalents of $302 million, down sequentially from $309.1 million. It has no bank debt outstanding as of Sep 30, 2021.

Guidance

For 2021, Cactus reiterated capital spending of $10-$15 million. The company expects significant rig additions in the United States in fourth-quarter 2021 and early 2022. Additionally, the company expects its Middle East operations to benefit from higher utilization of its rental equipment in the fourth quarter of 2021.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -9.56% due to these changes.

VGM Scores

Currently, Cactus, Inc. has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cactus, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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