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On Wednesday, Barclays (LON:BARC) analysts upgraded Cactus, Inc. (NYSE: WHD) stock rating from Equalweight to Overweight. The analysts raised the price target to $54 from $51, following Cactus Wellhead’s announcement of an agreement to acquire a 65% stake in Baker Hughes (NASDAQ:BKR)’ Surface Pressure Control (SPC) business for $345 million in cash. The deal includes an option for Cactus to acquire the remainder of the business two years after closing. The $3.52 billion market cap company, currently trading at $44.1, has demonstrated strong financial health according to InvestingPro analysis, with a "GREAT" overall rating.
Cactus, known as a leading service company in North America for surface pressure control, aims to diversify its portfolio through this acquisition. The SPC business generates all its revenue internationally, with 85% coming from the Middle East, the largest oil and gas market. This strategic move is expected to help Cactus scale up in this region, which is anticipated to grow through the end of the decade. With trailing twelve-month revenue of $1.14 billion and a solid track record of dividend payments, InvestingPro data reveals the company has maintained dividend distributions for seven consecutive years.
The acquisition offers Cactus entry into a less cyclical, project-based market. It provides earnings visibility supported by long-term contracts, with 30% of SPC’s revenue coming from aftermarket services. This stability is expected to benefit Cactus as it integrates the new business operations. The company’s strong financial position is evident in its impressive current ratio of 4.85, and according to InvestingPro analysis, it holds more cash than debt on its balance sheet.
Moreover, Cactus sees significant potential to increase its market share, particularly in Saudi Arabia, where SPC currently holds only a 10-15% share. The company also plans to improve margins by reducing costs and enhancing execution, further strengthening its market position.
Barclays’ upgrade reflects confidence in Cactus’s strategic acquisition and its potential to drive growth and expand its international presence.
In other recent news, Cactus Inc (NYSE:WHD). reported its first-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.73, compared to the forecasted $0.67. The company’s revenue also exceeded projections, reaching $280.32 million against an expected $270.57 million. In a strategic move, Cactus announced plans to acquire a 65% controlling interest in Baker Hughes’ Surface Pressure Control business for $344.5 million, with the deal expected to close in the second half of 2025. This acquisition aims to strengthen Cactus’s international market presence, particularly in the Middle East. Stifel analysts maintained a Buy rating on Cactus, reflecting confidence in the company’s strategic direction and financial health. At the company’s Annual Meeting of Stockholders, several key proposals were approved, including the reelection of board members and an amendment to the Long-Term Incentive Plan. Additionally, Cactus plans to finance the acquisition using cash reserves and a $225 million revolving credit facility. These developments indicate a period of growth and strategic expansion for Cactus Inc.
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