It has been about a month since the last earnings report for Cactus, Inc. (
WHD Quick Quote WHD - Free Report) . Shares have lost about 2.1% 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 drivers.
Cactus Misses Q2 Earnings Estimates
Cactus reported second-quarter 2021 adjusted earnings of 16 cents per share missed the Zacks Consensus Estimate of 18 cents. Nonetheless, the bottom line increased from 10 cents a year ago.
It recorded total revenues of $108.9 million, which beat the Zacks Consensus Estimate of $104 million and increased from the year-ago quarter’s $66.5 million.
The company’s weaker-than-expected earnings were caused by higher costs and expenses as well as equipment reactivation costs in the Rental unit. The negatives were partially offset by higher sales of wellhead and production-related equipment, backed by improved drilling activities in the United States.
The board agreed to boost quarterly cash dividend by 11% to 10 cents per share. In the second quarter alone, it paid $6.8 million through dividends.
Product business, the company generated revenues of $70.3 million, increasing from $40.9 million in the June quarter of 2020. Gross profit from the business unit was recorded at $22.2 million, up from the year-ago quarter’s $14.9 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.
Rental revenues were recorded at $14.6 million, up from $11.5 million in the year-ago quarter. Gross income from the Rental unit, however, declined to $0.2 million from the year-ago profit of $0.8 million. The segment suffered as a result of higher equipment reactivation costs.
Field Service and Other business segment, it generated revenues of almost $23.9 million, up from $14.1 million in the year-ago quarter. Gross profit from the business unit was $6.2 million, up from the year-ago quarter’s $2.6 million. Higher client activities resulted in increased billable hours, thereby boosting the unit. Expenses
The cost of product revenues was recorded at $48.1 million, which jumped from $26 million in the year-ago quarter. Also, cost of rental revenues was reported at $14.4 million, up from $10.7 million in the June quarter of 2020. The cost of field service and other revenues increased to $17.7 million from $11.5 million a year ago. As such, total expenses jumped to $91.6 million from the year-ago level of almost $57.7 million.
Capex and Cash Flow
The company’s second-quarter 2021 cash investment amount was recorded at $2.3 million. For the second quarter, operating cash flow came in at $27.5 million.
At second quarter-end, Cactus had cash and cash equivalents of $309.1 million, up sequentially from $291.9 million. It has no bank debt outstanding as of Jun 30, 2021.
For 2021, the company reiterated capital spending in the band of $10-$15 million. In the third quarter, it expects to generate revenues from the Middle-East, wherein it is expanding the business.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -13.64% due to these changes.
At this time, Cactus, Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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.
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.