Cactus (WHD) Q3 2026 earnings review
Cactus pipe sales hit a record, while wellhead shipments drop
Cactus, a maker of oilfield wellheads and flexible pipe, got a record quarter from its pipe division while its larger wellhead business slowed down. Flexible pipe revenue jumped 20% from last quarter and its order book nearly doubled, lifting the total company backlog to $616 million. That helped offset an 11% sequential drop in wellhead sales and pushed profit margins well above what the company's own plan pointed to. Chief executive Scott Bender expects sales in both divisions to rise slightly in the fourth quarter and announced a new Middle East pipe factory for 2029.
| Spoolable Technologies revenue | $126.9M +20.2% from last quarter |
|---|---|
| Pressure Control revenue | $304.8M -11.4% from last quarter |
| Profit per share, excluding one-offs | $0.96 +3.2% from last quarter |
| Order backlog | $615.6M +$159.8M from last quarter |
⚖️ Verdict: 🟢 Bullish
The story got better because overseas demand for flexible pipe is now strong enough to carry the business and justify a new Middle East plant, while wellhead margins held at 28% as acquisition accounting charges rolled off. One caution: beating the company's margin target says the plan was cautious, and because Cactus combines both divisions into one backlog number, the jump in pipe orders hides how many Middle East wellhead orders actually arrived.
The question now is whether the acquired Middle East wellhead unit is winning enough new contracts to grow after its initial order book runs down. Either the $160 million backlog jump includes major Middle East wellhead awards, or flexible pipe orders did almost all the work while wellhead demand stayed flat. A division backlog split on the conference call or fourth-quarter Middle East revenue will tell.
🐂 Bull Case
Flexible Pipe Sales and Orders Hit a Record
Spoolable Technologies makes flexible pipe that oil and gas producers use to carry fluids from wells. Cactus bought the business in 2023 to sell pipe alongside its wellhead equipment and expand outside North America. Chief executive Scott Bender said the division "meaningfully expanded sales with record international shipments and bookings since the acquisition, while achieving excellent margins."
- Division revenue: $126.9 million, up 20.2% from last quarter and 33.2% from a year ago
- Operating profit margin: 32.8%, up 2.3 percentage points from last quarter
- Profit margin before interest, taxes, depreciation and one-offs: 41.0%, up 1.1 percentage points
- Division order book: nearly doubled during the third quarter
The division beat the company's 15% to 20% sequential growth plan because both US and overseas shipments rose. Higher factory volume lifted margins to the top of the 39% to 41% target range. Bender expects sales to rise slightly in the fourth quarter, because international shipments will outweigh the usual winter slowdown in North America.
What to watch: fourth-quarter division revenue against the slight increase Bender forecast. A gain in a quarter when North American demand normally drops would confirm that overseas orders now drive the division's growth.
Lower Accounting Charges and Cost Cuts Lifted Margins
Pressure Control, the main division that sells and rents wellhead equipment, bought a majority stake in Baker Hughes's international wellhead unit at the start of 2026. Management had forecast the division's profit margin before interest, taxes, depreciation and one-offs to drop to between 22% and 24% this quarter as Middle East shipments slowed.
Instead, that margin rose 0.4 percentage points from last quarter to 28.3%, beating the middle of the company's outlook by 5.3 percentage points even as division sales fell 11.4%. Standard operating margin jumped 3.0 percentage points to 20.2%. Cactus attributed the gain to "continued strength in spares and repair margins in the Middle East and lower purchase price accounting-related adjustments".
Those acquisition accounting charges — mainly the write-off of stepped-up inventory value — fell from $20.0 million to $9.4 million, a drop of 2.7 percentage points of division revenue by our math. Because the company has now finished writing off that stepped-up inventory, standard operating profit is much closer to cash profit, though beating a cautious margin target for a second straight quarter is becoming a pattern.
What to watch: fourth-quarter Pressure Control margin on the conference call. A reading near 28% without the help of earlier tariff refunds would show that cost savings from the acquisition are holding.
🐻 Bear Case
Combined Reporting Hides the Middle East Order Rate
"I am also pleased with our order intake in the third quarter as our backlog grew by more than $150 million, nearly doubling in our Spoolable Technologies segment," Bender said. Remaining performance obligations — the backlog of signed customer orders — rose 35.1% from last quarter to $615.6 million, reversing a 15.2% drop in the second quarter.
Cactus still reports only one combined backlog figure, noting that "The majority of this backlog is associated with our Cactus International business, with the balance attributable to Spoolable Technologies". Because the flexible pipe order book nearly doubled after the company booked more than $130 million of international orders in July, flexible pipe drove a large share of the $159.8 million increase.
Meanwhile, Pressure Control revenue fell 11.4% from last quarter on lower Middle East shipments, and Bender expects Middle East activity to stay flat in the fourth quarter. Without a separate backlog number for each division, investors cannot verify whether the acquired Middle East wellhead business has fixed its slow first-half order intake or if pipe orders are masking a weak wellhead book.
What to watch: any division split of the $615.6 million backlog on the call or in the quarterly filing. A flat or shrinking wellhead book would mean Middle East customers are still delaying contract awards.
Working Capital Still Ties Up Over $900 Million
When Cactus bought the international wellhead business in January, it took on a large amount of inventory and accounts receivable — money customers owe for work already done, including unbilled revenue. Management said earlier this year that it would speed up customer billing over a couple of quarters to turn those balances into cash.
- Accounts receivable: $506.3 million, down 0.8% from last quarter while total sales fell 4.1%
- Inventories: $401.6 million, up 3.8% from last quarter and up 45.2% since year-end
- Nine-month cash drain from receivables and inventory: $105.9 million
Receivables barely budged even though Pressure Control shipments in the Middle East dropped, and inventory kept climbing. That means the international business is still tying up cash on the balance sheet rather than releasing it as early orders ship.
What to watch: the unbilled revenue figure inside the receivables note of the quarterly filing. Another increase from June's $156.5 million level would show that billing delays in the Middle East remain unresolved.
Risks this quarter didn't answer
Five standing concerns got no new information in the earnings release and await the conference call or the quarterly filing.
- Tariffs and Vietnam sourcing: the release did not say whether Vietnam reached the planned 15% share of US wellhead imports or update the cost of Chinese tariffs.
- Middle East shipping routes: no update on whether Red Sea and Strait of Hormuz vessel delays eased or worsened during the quarter.
- Raw material costs for pipe: no commentary on steel and plastic resin prices, which management previously flagged as a risk to flexible pipe margins.
- SafeLink patent lawsuit: no update on the intellectual property case with Cameron; any change in status will appear in the filing's legal note.
- Long-term cash obligations: Cactus still carries a $272.9 million tax-sharing liability and a $240.9 million partner stake that it may have to buy out starting in 2028.
👓 Other Themes
A New Middle East Factory Lifts Capital Spending
In September, the board approved building a flexible pipe factory in the Middle East. The plant is "expected to commence operations in 2029" and, together with the Texas expansion, will provide "necessary capacity for several years of growth", Bender said. Cactus did not disclose the total cost, but lifted its 2026 capital spending plan to about $65 million to fund long-lead equipment for both projects.
US Drilling Stays Flat as Oil Tailwinds Fade
Earlier this year, higher oil prices encouraged private US oil producers to add drilling rigs. That tailwind has now leveled off: Bender said the US land rig count will remain "approximately flat from today's levels through the remainder of the year". Even with flat rig activity, the company expects domestic wellhead sales to rise slightly in the fourth quarter.
💲 Other KPIs
Operating cash flow dropped from $104.6 million last quarter because Cactus paid $91.0 million to Baker Hughes "related to legal entity formation activities" for the January acquisition. Excluding that planned transfer, operations generated $109.4 million of cash and $93.3 million of free cash flow by our math. The payment reduced accounts payable by $108.8 million and left $354.2 million in cash.
Contract liabilities — cash deposits customers pay in advance for orders not yet delivered — rose 28.3% from last quarter. The balance has climbed every quarter since the international acquisition closed, up from $7.7 million at the end of 2025 to $33.6 million in the first quarter and $51.8 million in the second, helping fund the build-up in inventory.
The diluted share count assuming all operating units are converted into common stock rose 0.9% from a year ago and 0.3% from last quarter. Cactus did not buy back shares on the open market during the quarter, choosing instead to return $12.0 million to shareholders and unit holders through its $0.15 per share quarterly dividend.
🔮 Guidance
New. The plan calls for total sales to rise slightly from the third quarter's $430.9 million level, reversing this quarter's 4.1% sequential drop. Both divisions are expected to contribute to the fourth-quarter gain despite flat US drilling activity.
New. The outlook has division sales rebounding slightly from $304.8 million after falling 11.4% in the third quarter. Management expects US customer gains to combine with flat activity in the Middle East.
New. Sales are set to grow slightly from the record $126.9 million third-quarter level. After a 20.2% jump in the third quarter, continued overseas shipments are expected to outweigh the usual fourth-quarter winter slowdown in North America.
Raised. Management moved the plan to the top of its prior range, lifting the middle of the target by $5 million. It is the second raise this year: the midpoint stayed at $45 million in the first quarter, rose by $15 million in the second, and added $5 million now. By our math, that leaves $24.3 million for the fourth quarter, up 50.9% from third-quarter spending.
New. The board kept the quarterly payout at $0.15 per Class A share, matching the third-quarter rate after raising it by 7% in July.
❓ Key Questions
How does the $615.6 million backlog split between divisions?
Total backlog rose by $159.8 million and the flexible pipe book nearly doubled, but Cactus combines both divisions into one figure. Investors need the wellhead backlog number to see if Middle East orders actually recovered.
What will the new Middle East pipe factory cost?
The board approved building a flexible pipe plant in the Middle East to open in 2029 and ordered long-lead equipment, but the release gives no total budget or annual spending schedule for 2027 and 2028.
Did unbilled receivables in the Middle East start coming down?
Total accounts receivable stayed over $506 million even though Pressure Control sales fell 11.4%. The quarterly filing will show whether the $156.5 million of unbilled revenue from June finally started converting into cash.
Did Vietnam reach 15% of US wellhead imports?
Management previously targeted sourcing 15% of its US Pressure Control imports from Vietnam in the third quarter to reduce Chinese tariff costs, but the release did not mention tariffs or Vietnam.