Cactus (WHD) Rises 7% on $150M Buyback & Strong Q2 Guidance
Cactus Inc.’s (WHD) board of directors approved the repurchase of its Class A common stock, par value $0.01 per share, for up to $150 million in total. Following the announcement on Jun 7, the stock rallied almost 7%. The repurchase will be take place through open market transactions.
In an investor presentation released on the same date, WHD stated that it anticipates second-quarter sales for its pressure control segment to be flat to slightly higher than the first-quarter level, citing stronger-than-anticipated custom activity compared to rig declines. Second-quarter revenues for the spoolable technologies segment are anticipated in the range of $105-$110 million.
Due to increased activity and better cost management, WHD expects adjusted EBITDA margin of 34-36% for pressure control and “in the upper 30% range” for spoolable technologies.
Given that rig declines are likely to continue through the middle of 2023, Cactus anticipates the U.S. onshore rig count to reach 650 by the end of the second quarter.
According to Scott Bender, president and chief executive officer of Cactus, the share repurchase program reflects the company’s expectation of higher cash generation from both the Cactus and FlexSteel businesses (over industry cycles), which is not included in the current share valuation.
He added that the company expects to continue investing in strong organic growth possibilities, paying down debt, considering attractive mergers and acquisition opportunities, and maintaining a sustainable dividend, all while executing share repurchases.
Zacks Rank & Key Picks
Currently, Cactus carries a Zack Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Sunoco LP SUN, Eni SpA E and RGC Resources Inc. RGCO. While Sunoco sports a Zacks Rank #1 (Strong Buy), both Eni SpA and RGC Resources carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunoco, a distributor of motor fuel to approximately 10,000 convenience stores, has a stable business model with sustainable and predictable cash flows. For this year, SUN has witnessed an upward earnings estimate revision in the past 30 days.
Eni SpA is a leading integrated energy major, which operates primarily through three business segments — Exploration & Production (E&P), Gas & Power, and Refining & Marketing and Chemicals. E has witnessed an upward earnings estimate revision for 2023 and 2024, in the past 30 days.
RGC Resources is a holding company that offers energy and associated products and services through its operational subsidiaries — Roanoke Gas Company and RGC Midstream, LLC. RGCO has thousands of customers through its natural gas distribution companies that serve the Roanoke Valley and Bluefield, Virginia and West Virginia areas.
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