Cactus Inc. (WHD) is gearing up to release its second-quarter 2024 financial results after the market closes on July 31st. The company has a track record of exceeding expectations, having beaten the Zacks Consensus Estimate in three out of the last four quarters, with an average positive surprise of 12.9%.
The Latest Estimates:
Analysts are forecasting a slight dip in earnings for the second quarter, with the Zacks Consensus Estimate predicting a 70 cents per share profit. This represents an almost 17% decline from the same period last year. Revenue projections stand at £274.7 million, a 10.2% decrease year-on-year.
The Oil and Gas Landscape:
While crude oil prices remained favourable throughout the second quarter, with West Texas Intermediate (WTI) averaging over $79 per barrel, drilling activity took a downturn both domestically and internationally. This decline in drilling can be attributed to a combination of factors, including global economic uncertainties and ongoing efforts to transition to cleaner energy sources.
Impact on Cactus:
The reduced drilling activity is likely to have negatively impacted demand for Cactus's specialised pressure control and spoolable pipe technologies, which are essential for oil and gas exploration and production. The Zacks Consensus Estimate for operating profit from the Pressure Control division is only slightly higher than the previous year.
Earnings Whispers:
Zacks' proven model doesn't anticipate a strong earnings beat for Cactus this time around. The combination of a positive Earnings ESP and a favourable Zacks Rank (1-3) often signals a potential earnings beat. However, with an Earnings ESP of -1.07% and a Zacks Rank of #3 (Hold), Cactus doesn't meet these criteria.
Alternative Options:
Investors seeking companies with a greater chance of exceeding earnings expectations may want to consider Murphy USA Inc. (MUSA) and Marathon Oil Corporation (MRO). Both companies have an Earnings ESP above 0% and a Zacks Rank of #3, putting them in a more favourable position.
Murphy USA is scheduled to announce its second-quarter results on July 31st, with the Zacks Consensus Estimate forecasting earnings of £6.91 per share, an increase of almost 15% year-on-year. Marathon Oil is set to report on August 7th, with analysts predicting earnings of 69 cents per share, a significant jump of 43.8% from the previous year.
Final Thoughts:
As we approach the release of Cactus's second-quarter earnings, the company faces a challenging market environment. The decline in drilling activity and the absence of strong Zacks model indicators cast some doubt over the potential for a significant earnings beat. However, investors should stay tuned for the official results and the company's guidance for the future, as they could offer valuable insights into the trajectory of the oil and gas sector and Cactus's place within it.
