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Cactus (WHD) Down 3.3% Since Q4 Earnings Beat: Here's Why

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Cactus, Inc.’s WHD shares have declined 3.3% since it beat earnings estimates for fourth-quarter 2020, the results of which were announced on Feb 24. The company intends to reduce net capital expenditures for 2021 even though it anticipates major macroeconomic recoveries to boost demand for its products and services.

Q4 Results

The company 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.

Cactus, Inc. Price, Consensus and EPS Surprise

Cactus, Inc. Price, Consensus and EPS Surprise
Cactus, Inc. Price, Consensus and EPS Surprise

Cactus, Inc. price-consensus-eps-surprise-chart | Cactus, Inc. Quote

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.

Zacks Rank & Key Picks

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Berry Corporation BRY, ConocoPhillips COP and Altus Midstream Company ALTM, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Berry’s bottom-line estimates for 2021 have witnessed three upward revisions and no downward movement in the past 60 days.

ConocoPhillips’ sales for 2021 are expected to increase 54% year over year.

Altus Midstream’s bottom line for 2021 is expected to increase 380.5% year over year.

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