Overview of Cactus (WHD) earnings release for the 4th quarter of their 2021 fiscal year
Category: Cactus Inc
Date: 1 March 2022 Stock Price of Cactus Inc : $50.66 Market Capital of Cactus: $3.8 billion We take a look at the 4th quarter earnings release of their 2021 fiscal year of Cactus (WHD) a designer and manufacture of wellhead and high pressure control systems. For the 4th quarter the group reported revenue of 129.9 million and they recorded net income of $20.4 million
|
Scott Bender, President and CEO of Cactus - Were pleased to deliver strong sequential revenue growth during the fourth quarter. In our Product revenue category, market share(1) remained strong as public operators began adding rigs, following months of activity increases driven primarily by private operators"
About Cactus Inc
Cactus designs, manufactures, sells and rents a range of highly engineered wellhead and pressure control equipment. Its products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers’ wells. In addition, it provides field services for all its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment. Cactus operates service centers in the United States, which are strategically located in the key oil and gas producing regions, including the Permian, Marcellus, Utica, Haynesville, Eagle Ford, Bakken and SCOOP/STACK, among other areas, and in Eastern Australia. Cactus also conducts rental and service operations in the Kingdom of Saudi Arabia.
Overview of Cactus 4th quarter 2020 earnings report
Fourth Quarter 2021 Highlights
- Revenue of $129.9 million and income from operations of $25.7 million;
- Net income of $20.4 million(1) and diluted earnings per Class A share of $0.25(1);
- Adjusted net income(3) of $18.7 million, and diluted earnings per share, as adjusted(3) of $0.25;
- Net income margin of 15.7% and adjusted net income margin(3) of 14.4%;
- Adjusted EBITDA(4) and Adjusted EBITDA margin(4) of $36.6 million and 28.2%, respectively;
- Cash flow from operations of $11.7 million;
- Cash balance of $301.7 million with no bank debt outstanding as of December 31, 2021; and
- In January 2022, the Board of Directors (the “Board”) declared a quarterly cash dividend of $0.11 per share.
Cactus Inc management commentary on their 4th quarter 2021 earnings report
HOUSTON--(BUSINESS WIRE)-- Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) today announced financial and operating results for the fourth quarter and full year 2021.
Scott Bender, President and CEO of Cactus, commented, “We were pleased to deliver strong sequential revenue growth during the fourth quarter. In our Product revenue category, market share(1) remained strong as public operators began adding rigs, following months of activity increases driven primarily by private operators. Product margins improved sequentially, highlighting our ability to execute and the value proposition we provide to customers. Rental revenue growth meaningfully exceeded the change in domestic completion activity.
“Looking ahead to the first quarter of 2022, we anticipate continued revenue growth across all of our business lines. The current commodity price environment remains supportive, and we expect the pace of rig additions to remain near levels experienced over the last several months. While inflationary pressures persist, differentiated suppliers remain better able to recover costs from a healthy customer base. Significant growth is expected in our Rental revenue category in early 2022 as the supply and demand dynamics in this market start to improve.”
Mr. Bender concluded, “All signs currently point toward continued oilfield activity gains to start the year. Our team’s foresight and ability to overcome issues within the global supply chain have Cactus well prepared to respond to increased demand for equipment and services. We remain optimally positioned due to our market leadership, supply chain flexibility and fortress balance sheet. As activity improves, we will also maintain our steadfast focus on margins and returns. With this in mind, our board recently approved a 10% increase in our quarterly dividend to $0.11 per share.”
Scott Bender, President and CEO of Cactus, commented, “We were pleased to deliver strong sequential revenue growth during the fourth quarter. In our Product revenue category, market share(1) remained strong as public operators began adding rigs, following months of activity increases driven primarily by private operators. Product margins improved sequentially, highlighting our ability to execute and the value proposition we provide to customers. Rental revenue growth meaningfully exceeded the change in domestic completion activity.
“Looking ahead to the first quarter of 2022, we anticipate continued revenue growth across all of our business lines. The current commodity price environment remains supportive, and we expect the pace of rig additions to remain near levels experienced over the last several months. While inflationary pressures persist, differentiated suppliers remain better able to recover costs from a healthy customer base. Significant growth is expected in our Rental revenue category in early 2022 as the supply and demand dynamics in this market start to improve.”
Mr. Bender concluded, “All signs currently point toward continued oilfield activity gains to start the year. Our team’s foresight and ability to overcome issues within the global supply chain have Cactus well prepared to respond to increased demand for equipment and services. We remain optimally positioned due to our market leadership, supply chain flexibility and fortress balance sheet. As activity improves, we will also maintain our steadfast focus on margins and returns. With this in mind, our board recently approved a 10% increase in our quarterly dividend to $0.11 per share.”
Selling, General and Administrative Expenses (“SG&A”)
SG&A for the fourth quarter of 2021 was $12.9 million (9.9% of revenues), compared to $12.1 million (10.5% of revenues) for the third quarter of 2021 and $9.0 million (13.2% of revenues) for the fourth quarter of 2020. The sequential increase was primarily due to higher bonus accruals related to the Company's improved financial performance and higher employee benefits expenses.
Liquidity, Capital Expenditures and Other
As of December 31, 2021, the Company had $301.7 million of cash and no bank debt outstanding. Operating cash flow was $11.7 million for the fourth quarter of 2021. During the fourth quarter, the Company made dividend payments and associated distributions of $7.6 million.
Net cash used in investing activities represented $3.2 million during the fourth quarter of 2021. Net capital expenditures for the full year 2021 were $11.6 million. For the full year 2022, the Company expects net capital expenditures to be in the range of $20 million to $30 million.
Quarterly Dividend
In January 2022 the Board approved and the Company announced the payment of a cash dividend of $0.11 per share of Class A common stock to be paid on March 17, 2022 to holders of record of Class A common stock at the close of business on February 28, 2022. A corresponding distribution of up to $0.11 per CW Unit has also been approved for holders of CW Units of Cactus Wellhead, LLC.
SG&A for the fourth quarter of 2021 was $12.9 million (9.9% of revenues), compared to $12.1 million (10.5% of revenues) for the third quarter of 2021 and $9.0 million (13.2% of revenues) for the fourth quarter of 2020. The sequential increase was primarily due to higher bonus accruals related to the Company's improved financial performance and higher employee benefits expenses.
Liquidity, Capital Expenditures and Other
As of December 31, 2021, the Company had $301.7 million of cash and no bank debt outstanding. Operating cash flow was $11.7 million for the fourth quarter of 2021. During the fourth quarter, the Company made dividend payments and associated distributions of $7.6 million.
Net cash used in investing activities represented $3.2 million during the fourth quarter of 2021. Net capital expenditures for the full year 2021 were $11.6 million. For the full year 2022, the Company expects net capital expenditures to be in the range of $20 million to $30 million.
Quarterly Dividend
In January 2022 the Board approved and the Company announced the payment of a cash dividend of $0.11 per share of Class A common stock to be paid on March 17, 2022 to holders of record of Class A common stock at the close of business on February 28, 2022. A corresponding distribution of up to $0.11 per CW Unit has also been approved for holders of CW Units of Cactus Wellhead, LLC.
Cactus (WHD) stock price chart over the last 5 years
The image below shows the stock price history of Cactus Inc (WHD) over the last 5 years. And it's been a good time for Cactus stockholders. Over the last 5 years the stock of Cactus increased by 151% over the last 5 years.
Cactus stock is trading at close to the midpoint between its 52 week high and its 52 week low which to us is an indication that the short term sentiment and momentum of Cactus stock is neutral at this point in time.
Cactus stock is trading at close to the midpoint between its 52 week high and its 52 week low which to us is an indication that the short term sentiment and momentum of Cactus stock is neutral at this point in time.
Cactus Inc (WHD) latest stock valuation
So based on Cactus' 4th quarter 2021 earnings report what do we value Cactus stock at? Based on Cactus earnings reported we value their stock at $16.40 a stock
We therefore believe that the stock of Cactus Inc stock is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $12.40. A good entry price into JetBlue (JBLU) stock would therefore be at $11.20 or below.
We expect the stock of JetBlue to tick up nicely if the US economy starts opening up again and people start travelling between states again on a regular basis. While the current operating environment will burn through their cash reserves, but if things return to relatively normal any time soon the group should be able to ride out the current crises engulfing global economies and in particular the airline and tourism industry
We therefore believe that the stock of Cactus Inc stock is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $12.40. A good entry price into JetBlue (JBLU) stock would therefore be at $11.20 or below.
We expect the stock of JetBlue to tick up nicely if the US economy starts opening up again and people start travelling between states again on a regular basis. While the current operating environment will burn through their cash reserves, but if things return to relatively normal any time soon the group should be able to ride out the current crises engulfing global economies and in particular the airline and tourism industry
Next earnings release of Cactus Inc
It is expected that Cactus Inc will release their 1st quarter 2022 earnings release in late April 2022