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Cactus, Inc. (WHD) Down 5.8% Since Last Earnings Report: Can It Rebound?

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Zacks Equity Research
·4 min read
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It has been about a month since the last earnings report for Cactus, Inc. (WHD). Shares have lost about 5.8% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Cactus Beats Q4 Earnings Estimates, Revenues Missed

Cactus announced fourth-quarter 2020 adjusted earnings of 8 cents per share, surpassing the Zacks Consensus Estimate by a penny. However, the bottom line declined from 37 cents a year ago.

It recorded total revenues of $68.1 million, which marginally missed the Zacks Consensus Estimate of $69 million and declined from the year-ago quarter’s $140.2 million.

The company’s better-than-expected earnings were owing to lower costs and expenses across all the segments. Increased client activities in Field Services raised billable hours and ancillary services. The positives were partially offset by lower income from the Product unit. Also, decreased utilization of rental equipment negatively impacted the results.

Business Segments

From the Product business, the company generated revenues of $43 million, declining from $83.4 million in the December quarter of 2020. Gross profit from the business unit was recorded at $13.3 million, down from the year-ago quarter’s $31.1 million. A decline in credits regarding tariff refunds affected the segment.

The company’s Rental revenues were recorded at $8.6 million, down from $28.2 million in the year-ago quarter. Gross loss from the Rental unit was $0.8 million against the year-ago profit of $12.8 million. The segment suffered as a result of a decline in the utilization of rental equipment by clients in the quarter.

From the Field Service and Other business segment, it generated revenues of $16.5 million, down from $28.7 million in the year-ago quarter. Gross profit from the business unit was $5 million, up from the year-ago quarter’s $4.6 million. Increased client activities raised billable hours and ancillary services.

Expenses

The cost of product revenues was recorded at $29.8 million, which plummeted from $52.3 million in the year-ago quarter. Also, cost of rental revenues was reported at $9.4 million, down from $15.4 million in the December quarter of 2019. The cost of field service and other revenues fell to $11.5 million from $24.1 million a year ago. As such, total expenses decreased to $59.7 million from the year-ago level of $104.2 million.

Capex and Cash Flow

The company’s full-year 2020 capital expenditures were recorded at $24.5 million, down from the year-ago period’s $59.7 million. For the fourth quarter, operating cash flow came in at $21.9 million.

Balance Sheet

At fourth quarter-end, Cactus had cash and cash equivalents of $288.7 million. It has no bank debt outstanding as of Dec 31, 2020.

Guidance

For 2021, the company anticipates net capital expenditure in the $10-$15 million range, signaling a decrease from the 2020 level of $18.1 million. It foresees the recovering market to boost demand for products and services in the first quarter. The company shipped equipment in the Middle East this January, which will provide growth momentum this year. Moreover, it expects selling, general and administrative expenses for the first quarter of 2021 to be just less than $10 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 25% due to these changes.

VGM Scores

Currently, Cactus, Inc. has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, 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 upward for the stock, and the magnitude of these revisions looks promising. 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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