Cactus (WHD) Q2 EPS Falls 18.5%

Core Viewpoint - Cactus reported weaker-than-expected second quarter results, missing analyst projections for both non-GAAP earnings and GAAP revenue, primarily due to declining North American oilfield activity and increased tariff pressures [1][6][10] Financial Performance - Non-GAAP EPS was $0.66, below the expected $0.72, and down 18.5% from $0.81 in Q2 2024 [2] - GAAP revenue was $273.6 million, missing the consensus of $278.8 million and down 5.8% from $290.4 million in Q2 2024 [2][5] - Adjusted EBITDA was $86.7 million, a decline of 16.4% from $103.6 million year-over-year [2] - Net income was $49.0 million, down 22.3% from $63.1 million in the previous year [2] Segment Performance - The Pressure Control segment faced significant revenue declines, dropping 5.5% sequentially and 4.0% year-over-year, attributed to lower frac equipment rental and increased tariffs [6][10] - Operating margin for the Pressure Control segment decreased to 23.5%, down from 28.6% last quarter and 29.7% in the same period last year [7] - In contrast, the Spoolable Technologies segment saw a sequential revenue growth of 3.9%, driven by international demand, particularly in the Middle East [8][9] Strategic Initiatives - The company is focusing on integrating FlexSteel, enhancing supply chains, and increasing international exposure to mitigate reliance on the U.S. market [4][14] - Cactus is transitioning manufacturing from China to Vietnam to address tariff impacts, with expectations for partial relief once API certification is achieved [8][13] - The acquisition of 65% of Baker Hughes's Surface Pressure Control business is in progress, aimed at expanding international reach and product offerings [16] Cash Flow and Capital Expenditures - Cash flow remained strong, with cash and equivalents rising to $405.2 million and no outstanding bank debt [11] - Full-year 2025 net capital expenditures guidance was reduced to $40–$45 million, reflecting a conservative outlook [11] - The quarterly dividend was raised by 8% to $0.14 per share, demonstrating a commitment to shareholder returns despite profitability pressures [12] Outlook - Management anticipates modest revenue declines in both main segments due to ongoing weakness in North American oilfield activity [17] - No specific revenue or earnings guidance was provided for the next quarter or full year, with a focus on right-sizing the organization for the second half of the year [17]