Company Performance - Cactus, Inc. reported quarterly earnings of $0.66 per share, missing the Zacks Consensus Estimate of $0.67 per share, and down from $0.81 per share a year ago, representing an earnings surprise of -1.49% [1] - The company posted revenues of $273.58 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 0.74%, and down from $290.39 million year-over-year [2] - Over the last four quarters, Cactus has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Outlook - Cactus shares have lost approximately 19.2% since the beginning of the year, while the S&P 500 has gained 8.3% [3] - The current consensus EPS estimate for the coming quarter is $0.66 on revenues of $275.8 million, and for the current fiscal year, it is $2.66 on revenues of $1.1 billion [7] - The estimate revisions trend for Cactus was unfavorable ahead of the earnings release, resulting in a Zacks Rank 5 (Strong Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Oil and Gas - Integrated - United States industry, to which Cactus belongs, is currently in the bottom 8% of over 250 Zacks industries, suggesting a challenging environment [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment [5]

[Cactus Second Quarter 2025 Results](index=1&type=section&id=Cactus%20Announces%20Second%20Quarter%202025%20Results) The company reported Q2 2025 results, highlighting key financial metrics, strategic acquisitions, and segment performance [Financial & Operational Highlights](index=1&type=section&id=Second%20Quarter%20Highlights) Cactus reported Q2 2025 revenue of $273.6 million, announced a key acquisition, and increased its quarterly dividend Q2 2025 Financial Summary (vs. Q1 2025 & Q2 2024) | Financial Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | **Revenues** | $273.6M | $280.3M | $290.4M | | **Operating Income** | $60.8M | $68.6M | $79.8M | | **Operating Margin** | 22.2% | 24.5% | 27.5% | | **Net Income** | $49.0M | $54.1M | $63.1M | | **Adjusted Net Income** | $53.2M | $58.8M | $65.2M | | **Adjusted EBITDA** | $86.7M | $93.8M | $103.6M | | **Adjusted EBITDA Margin** | 31.7% | 33.5% | 35.7% | - Diluted earnings per Class A share were **$0.59**, or **$0.66** on an adjusted basis for Q2 2025[5](index=5&type=chunk) - The company generated **$82.8 million** in cash flow from operations and ended the quarter with **$405.2 million** in cash and no bank debt[5](index=5&type=chunk) - Signed an agreement to acquire a **65% majority interest** in Baker Hughes' Surface Pressure Control business, a key strategic move for diversification[5](index=5&type=chunk) - The Board of Directors approved an **8% dividend increase** to $0.14 per Class A share per quarter[5](index=5&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) Management attributed resilient performance to diversification while noting impacts from lower activity and tariffs, and highlighted a key strategic acquisition - The **FlexSteel acquisition** provided portfolio diversification, leading to resilient cash flows and revenues despite a decline in U.S. land activity[7](index=7&type=chunk) - The Pressure Control segment was **negatively impacted by tariffs**, particularly the unexpected doubling of the Section 232 tariff during the quarter[7](index=7&type=chunk) - The company expects revenues to be **down modestly** in both segments in Q3 2025, following lower average domestic activity levels[7](index=7&type=chunk) - The planned acquisition of Baker Hughes' Surface Pressure Control business is a strategic response to North American market softness and tariff uncertainty, aiming for **geographic and revenue diversification**[7](index=7&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) The Spoolable Technologies segment grew while the Pressure Control segment declined due to lower activity and tariff impacts [Pressure Control](index=2&type=section&id=Pressure%20Control) The Pressure Control segment's revenue and operating income declined sequentially due to lower rental activity and tariff impacts Pressure Control Q2 2025 Sequential Performance | Metric | Q2 2025 | Change from Q1 2025 | Reason | | :--- | :--- | :--- | :--- | | **Revenue** | $179.8M | -$10.5M (-5.5%) | Lower rental revenues and equipment sales | | **Operating Income** | $42.3M | -$12.0M (-22.1%) | Tariff impacts, increased legal expenses | | **Adj. Segment EBITDA** | $53.1M | -$11.7M (-18.0%) | N/A | | **Adj. Segment EBITDA Margin** | 29.5% | -450 bps | N/A | [Spoolable Technologies](index=2&type=section&id=Spoolable%20Technologies) The Spoolable Technologies segment saw sequential growth in revenue and operating income, driven by higher customer activity Spoolable Technologies Q2 2025 Sequential Performance | Metric | Q2 2025 | Change from Q1 2025 | Reason | | :--- | :--- | :--- | :--- | | **Revenue** | $96.2M | +$3.6M (+3.9%) | Higher customer activity levels | | **Operating Income** | $28.1M | +$4.2M (+17.5%) | Higher volume and operating leverage | | **Adj. Segment EBITDA** | $37.9M | +$4.4M (+13.2%) | N/A | | **Adj. Segment EBITDA Margin** | 39.4% | +320 bps | N/A | [Corporate and Other Expenses](index=3&type=section&id=Corporate%20and%20Other%20Expenses) Corporate expenses remained flat sequentially and included transaction costs related to the Baker Hughes acquisition - Second quarter Corporate and Other expenses were flat compared to the first quarter and included **$3.5 million** of transaction-related expenses for the Baker Hughes SPC business acquisition[11](index=11&type=chunk) [Financial Position and Shareholder Returns](index=3&type=section&id=Financial%20Position%20and%20Shareholder%20Returns) The company maintained a strong balance sheet with significant cash, no debt, and increased its quarterly dividend [Liquidity and Capital Expenditures](index=3&type=section&id=Liquidity%2C%20Capital%20Expenditures%20and%20Other) The company ended the quarter with a strong liquidity position and updated its full-year capital expenditure guidance - As of June 30, 2025, the company had **$405.2 million** in cash and cash equivalents with no bank debt outstanding[12](index=12&type=chunk) - Generated **$82.8 million** in operating cash flow during the second quarter of 2025[12](index=12&type=chunk) - The company now expects full-year 2025 net capital expenditures to be between **$40 million and $45 million**[13](index=13&type=chunk) [Shareholder Returns](index=3&type=section&id=Quarterly%20Dividend) The Board of Directors approved an 8% increase in the quarterly cash dividend to enhance shareholder returns - The Board of Directors approved a quarterly cash dividend of **$0.14 per share** of Class A common stock, representing an **8% increase**[5](index=5&type=chunk)[15](index=15&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) The condensed consolidated financial statements show year-over-year declines in revenue and net income but growth in total assets [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The income statement reflects a year-over-year decrease in total revenues, net income, and diluted earnings per share for Q2 2025 Income Statement Summary (Year-over-Year) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Revenues** | $273,575 | $290,389 | | **Total Operating Income** | $60,805 | $79,819 | | **Net Income** | $49,047 | $63,059 | | **Diluted EPS** | $0.59 | $0.75 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows an increase in total assets driven by higher cash balances, with liabilities remaining stable Balance Sheet Summary | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Cash and cash equivalents** | $405,177 | $342,843 | | **Total current assets** | $873,351 | $774,688 | | **Total assets** | $1,824,529 | $1,739,328 | | **Total liabilities** | $475,992 | $475,149 | | **Total equity** | $1,348,537 | $1,264,179 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased for the first six months of 2025 compared to the prior year period Cash Flow Summary (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $124,380 | $164,218 | | **Net cash used in investing activities** | ($26,507) | ($14,054) | | **Net cash used in financing activities** | ($36,546) | ($37,195) | | **Net increase in cash** | $62,334 | $112,711 | [Supplemental Information (Non-GAAP Reconciliations)](index=8&type=section&id=Supplemental%20Information%20(Non-GAAP%20Reconciliations)) This section provides reconciliations of GAAP to non-GAAP measures like Adjusted Net Income and Adjusted EBITDA to clarify core performance [Reconciliation of Adjusted Net Income](index=8&type=section&id=Reconciliation%20of%20Adjusted%20Net%20Income) Adjusted Net Income for Q2 2025 was $53.2 million after accounting for transaction expenses and intangible amortization Reconciliation of Net Income to Adjusted Net Income (Q2 2025) | Description | Amount (in thousands) | | :--- | :--- | | **Net income (GAAP)** | **$49,047** | | Transaction related expenses | $3,502 | | Intangible amortization expense | $3,997 | | Severance expenses | $177 | | Income tax expense differential | ($3,474) | | **Adjusted net income (Non-GAAP)** | **$53,249** | [Reconciliation of Adjusted EBITDA](index=9&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA) Adjusted EBITDA for Q2 2025 was $86.7 million, reconciled from GAAP Net Income by adding back non-cash and non-recurring items Reconciliation of Net Income to Adjusted EBITDA (Q2 2025) | Description | Amount (in thousands) | | :--- | :--- | | **Net income (GAAP)** | **$49,047** | | Interest income, net | ($2,518) | | Income tax expense | $14,276 | | Depreciation and amortization | $15,886 | | **EBITDA** | **$76,691** | | Transaction related expenses | $3,502 | | Stock-based compensation | $6,307 | | Severance expenses | $177 | | **Adjusted EBITDA (Non-GAAP)** | **$86,677** | [Reconciliation of Adjusted Segment EBITDA](index=10&type=section&id=Reconciliation%20of%20Adjusted%20Segment%20EBITDA) Adjusted Segment EBITDA for Q2 2025 was $53.1 million for Pressure Control and $37.9 million for Spoolable Technologies Pressure Control Adjusted Segment EBITDA (Q2 2025) | Description | Amount (in thousands) | | :--- | :--- | | **Operating income** | **$42,333** | | Depreciation and amortization | $7,138 | | Stock-based compensation | $3,432 | | Severance expenses | $177 | | **Adjusted Segment EBITDA** | **$53,080** | Spoolable Technologies Adjusted Segment EBITDA (Q2 2025) | Description | Amount (in thousands) | | :--- | :--- | | **Operating income** | **$28,053** | | Depreciation and amortization | $8,748 | | Stock-based compensation | $1,146 | | **Adjusted Segment EBITDA** | **$37,947** |

Core Insights - Cactus Inc. has entered into an agreement to acquire 65% of Baker Hughes' Surface Pressure Control Business for approximately $344.5 million, establishing a joint venture where Cactus will assume operational control [1][8] Overview of the Baker Hughes SPC Business - The Baker Hughes Surface Pressure Control Business specializes in designing, manufacturing, and servicing surface pressure control solutions, primarily wellheads and production tree systems, with a strong international market presence [2] - Post-transaction, Baker Hughes will retain a 35% stake in the joint venture [2] Geographic Diversification and Revenue Stability - The acquisition allows Cactus to maintain its capital-light manufacturing model while benefiting from geographic diversification, as 85% of SPC's revenues are generated from the Middle East [3][5] - The limited dependence on the U.S. market for external sales enhances revenue resilience against domestic market fluctuations [3] Long-Term Growth Potential - The deal is expected to significantly enhance Cactus' financial metrics, including earnings and cash flow growth, with SPC having a backlog exceeding $600 million in product and aftermarket service orders as of year-end 2024 [4][8] - Cactus aims to maintain a conservative balance sheet while leveraging the acquisition for revenue and cash flow generation [4] Strategic Market Positioning - The geographic footprint of Baker Hughes' SPC Business complements Cactus' existing operations and provides access to new markets unaffected by tariffs, supporting growth and revenue stability across various market cycles [5]

Group 1 - Cactus (NYSE: WHD) has shown solid earnings power and an interesting deal, indicating a promising start to 2023 [1] - The investing group "Value In Corporate Events" focuses on capitalizing on major corporate events such as IPOs, mergers & acquisitions, and earnings reports [2] - The group provides coverage of 10 major events per month, aiming to identify the best investment opportunities [2]

Summary of Cactus (WHD) M&A Announcement Conference Call Company and Industry - **Company**: Cactus, Inc. (WHD) - **Industry**: Oilfield Equipment and Services - **Acquisition Target**: Baker Hughes Surface Pressure Control (SPC) business Core Points and Arguments 1. **Acquisition Announcement**: Cactus announced the acquisition of a 65% controlling stake in Baker Hughes' SPC business for approximately $344.5 million, establishing a joint venture with Baker Hughes [6][12][10] 2. **Strategic Rationale**: The acquisition aims to create a global, capital-light oilfield equipment company, enhancing Cactus's geographic presence, particularly in the Mideast, a key growth market for oilfield services [6][10][8] 3. **Financial Metrics**: The transaction values the SPC business at approximately $530 million, with a purchase price representing a multiple of about 6.7x 2024 transaction-adjusted EBITDA [12][10] 4. **Revenue and Market Presence**: SPC generated nearly $500 million in revenue in 2024, with 85% of its revenue coming from the Mideast. The business has a strong backlog exceeding $600 million, indicating stable revenue potential [16][18][10] 5. **Operational Synergies**: Cactus expects to achieve approximately $10 million in annual cost synergies within one year post-acquisition, despite initial dis-synergies due to corporate infrastructure expansion [14][15] 6. **Market Dynamics**: Cactus aims to leverage its existing knowledge and relationships to enhance SPC's performance and capture market share in the Mideast, where it currently faces competition from major players like Schlumberger [48][50][49] 7. **Long-term Strategy**: The acquisition is seen as a pathway to expand Cactus's international footprint, with plans to pursue opportunities beyond the Mideast while maintaining a strong U.S. presence [53][52] Other Important Content 1. **Risk Factors**: The call included a disclaimer regarding forward-looking statements and the inherent risks associated with such projections [4][3] 2. **Financial Flexibility**: Cactus plans to maintain a conservative balance sheet and significant financial flexibility post-acquisition, with little to no net debt anticipated at closing [14][10] 3. **Cultural Integration**: Cactus emphasizes the importance of instilling its operational excellence culture within SPC to drive performance improvements [26][57] 4. **Market Share Potential**: There is significant room for market share growth in the Mideast, particularly in Saudi Arabia and Oman, where Cactus sees opportunities to improve SPC's competitive position [48][49] 5. **Aftermarket Services**: Over 30% of SPC's revenue comes from aftermarket services, providing a stable revenue stream that is less dependent on new drilling activities [18][16] This summary encapsulates the key points discussed during the conference call regarding Cactus's acquisition of Baker Hughes' SPC business, highlighting the strategic, financial, and operational implications of the deal.

Transaction Overview - Cactus will acquire 65% of Baker Hughes' Surface Pressure Control (SPC) business for $344.5 million, valuing SPC at $530 million on a cash-free, debt-free basis[9] - The upfront purchase price of 65% represents approximately 6.7x 2024 Transaction Adjusted EBITDA[9] - Cactus expects to achieve annualized cost synergies of approximately $10 million within 12 months of closing[9] SPC Business Highlights - SPC's 2024 revenue was $498 million with an Adjusted EBITDA of $87 million, resulting in a 17% Adjusted EBITDA Margin[10] - SPC had a backlog of over $600 million as of December 31, 2024[9, 10] - Approximately 85% of SPC's revenues come from the Middle East[10] - SPC's 2024 Aftermarket Service Revenue was over $150 million[10] Pro Forma Financials (2024, Excluding Synergies) - Combined Cactus and SPC revenue would be $1,628 million ($1.13 billion from Cactus and $498 million from SPC)[22] - Combined Adjusted EBITDA would be $479 million ($392 million from Cactus and $87 million from SPC)[22] - The combined Adjusted EBITDA Margin would be 29% (35% from Cactus and 17% from SPC)[22]

Core Viewpoint - Baker Hughes has announced a joint venture with Cactus, Inc., where Baker Hughes will contribute its surface pressure control product line, with Cactus owning 65% and Baker Hughes retaining 35% [1][6]. Group 1: Joint Venture Details - The joint venture will operate independently from Cactus' existing Pressure Control business and will focus on maintaining leadership in the international market for surface wellhead and production tree systems [2]. - The transaction is expected to close in the second half of 2025, subject to customary conditions including regulatory approvals [4]. Group 2: Strategic Alignment - This joint venture aligns with Baker Hughes' strategy to enhance earnings durability and cash flow, allowing for capital reallocation towards higher-return opportunities [3]. - The CEO of Baker Hughes emphasized that this transaction is a significant step in optimizing the company's portfolio, focusing on core growth areas and driving higher returns for shareholders [4]. Group 3: Company Background - Baker Hughes is an energy technology company providing solutions to energy and industrial customers globally, with operations in over 120 countries [5].

Core Viewpoint - Cactus, Inc. (WHD) has seen its shares increase by approximately 5.5% over the past month, outperforming the S&P 500, but there are concerns about whether this positive trend will continue leading up to the next earnings release [1]. Group 1: Earnings Report and Estimates - The consensus estimate for Cactus has shifted downward by 6.22% over the past month, indicating a negative trend in estimates revisions [2]. - The stock has received a Zacks Rank of 4 (Sell), suggesting expectations of below-average returns in the coming months [4]. Group 2: VGM Scores - Cactus currently holds a Growth Score of B, but has a low Momentum Score of F, indicating weak performance in that area [3]. - The stock has a Value Score of D, placing it in the bottom 40% for this investment strategy, leading to an overall aggregate VGM Score of D [3].

Core Insights - National Fuel Gas (NFG) is currently viewed as a better value opportunity compared to Cactus, Inc. (WHD) based on various financial metrics and Zacks Rank [1][3][7] Valuation Metrics - NFG has a forward P/E ratio of 12.01, while WHD has a forward P/E of 14.86, indicating that NFG is potentially undervalued [5] - The PEG ratio for NFG is 0.59, suggesting a favorable earnings growth outlook compared to WHD's PEG ratio of 5.09, which indicates a less attractive growth perspective [5] - NFG's P/B ratio stands at 2.63, compared to WHD's P/B of 2.69, further supporting NFG's valuation advantage [6] Earnings Outlook - NFG is experiencing an improving earnings outlook, which enhances its attractiveness in the Zacks Rank model, contrasting with WHD's weaker outlook [3][7]

Core Insights - Cactus, Inc. reported revenue of $280.32 million for the quarter ended March 2025, reflecting a 2.3% increase year-over-year and a 4.67% surprise over the Zacks Consensus Estimate of $267.82 million [1] - The company's EPS was $0.73, down from $0.75 in the same quarter last year, with a surprise of 4.29% over the consensus estimate of $0.70 [1] Revenue Performance - Spoolable Technologies revenue was $92.58 million, exceeding the average estimate of $89.61 million, but showing a decline of 6.6% compared to the previous year [4] - Pressure Control revenue reached $190.28 million, surpassing the average estimate of $178.44 million, and increased by 8.7% year-over-year [4] Operating Income - Operating income for Pressure Control was $54.33 million, above the average estimate of $51.71 million [4] - Corporate and other expenses reported an operating loss of $9.60 million, worse than the average estimate of -$6.43 million [4] - Operating income for Spoolable Technologies was $23.88 million, slightly above the average estimate of $23.29 million [4] Stock Performance - Cactus shares have returned -2.3% over the past month, compared to a -0.5% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]