Advertisement

Analysts Just Made A Notable Upgrade To Their Cactus, Inc. (NYSE:WHD) Forecasts

Cactus, Inc. (NYSE:WHD) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. The market may be pricing in some blue sky too, with the share price gaining 34% to US$23.73 in the last 7 days. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

Following the upgrade, the consensus from ten analysts covering Cactus is for revenues of US$335m in 2021, implying a concerning 20% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to nosedive 46% to US$0.56 in the same period. Previously, the analysts had been modelling revenues of US$304m and earnings per share (EPS) of US$0.43 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

See our latest analysis for Cactus

earnings-and-revenue-growth
earnings-and-revenue-growth

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$24.58, suggesting that the forecast performance does not have a long term impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Cactus at US$28.00 per share, while the most bearish prices it at US$16.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 20%, a significant reduction from annual growth of 24% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.4% annually for the foreseeable future. It's pretty clear that Cactus' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Cactus could be a good candidate for more research.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Cactus analysts - going out to 2022, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.