Are Mid-Caps Tidewater And Cactus Among New Energy Leaders?

While the large-cap energy sector is up 14% in the past three months, mid-cap energy stocks have also been in rally mode.

Tidewater Inc. (NYSE: TDW)andCactus Inc. (NYSE: WHD) which are in the field services and equipment businesses, respectively, are currently actionable after recently reporting earnings.

Mid-cap stocks are frequently overlooked by investors. That’s especially true in sectors such as energy, where the big explorers and producers are among the S&P 500’s largest components, with many being familiar brand names. 

Mid-caps have some unique advantages, though. They tend to be more financially stable than newer small caps, but also have the ability to grow faster than larger, longer-established companies. Mid-caps have that magical combination of a proven business model, plus potential for significant growth. 

Tidewater Outperforms Broader Energy Sector

Shares of Houston-based Tidewater are up 29.25% in the past three months and up 64.88% year-to-date, outperforming the large-cap energy sector, as tracked by the Energy Select Sector SPDR Fund (NYSEARCA: XLE).

Tidewater provides marine and transportation services to the global offshore energy industry. At the end of 2022, it had 183 active vessels serving customers in over 30 countries in the Americas, the Asia Pacific region, the Middle East, the Europe/Mediterranean region, and  West Africa.

In July, Tidewater acquired 37 platform supply vessels and related assets from Solstad Offshore ASA. The combination resulted in the world’s largest hybrid offshore service vessel fleet. 

The company pivoted to profitability in 2022, due to rising oil prices and an industry-wide improvement for the offshore market after a multi-year downturn. 

Monster Earnings Growth Ahead?

This year, Wall Street sees Tidewater earning $3.37 a share, way up from last year’s earnings of 22 cents a share. Next year, that’s seen more than doubling, to $7.49 per share. 

Wall Street is quite bullish on the stock: MarketBeat’s Tidewater analyst ratings show a consensus view of “buy” with a price target of $83.33, an upside of 35.63% over where it’s currently trading.

The Tidewater chart shows the stock pulling back after reaching a high of $67.20 on August 9, after the company reiterated its full-year earnings guidance. Tidewater stock got strong support at its 50-day moving average, a sign that investors were paring back positions slightly, rather than selling off wholesale.  

That chart action is consistent with analysts’ upbeat views on the stock.

Cactus Stock Currently Actionable

Houston-based Cactus is currently in a buy zone, having pulled back and found support well above its 50-day moving average. 

The company designs, manufactures, and sells wellhead and pressure control equipment. Its ticker, WHD, is a reference to the word “wellhead.”  

It also provides field services for its equipment. In 2022, 66% of total revenue came from product sales, 14% from rentals, and 20% from field services and other equipment. The “other equipment” category includes leasing of real estate, apartments, forklifts, vehicles, and other items used in the drilling process. 

Cactus operates 15 service centers throughout the U.S., and has operations in Australia, Saudi Arabia and China. 

Cactus is one of those companies that’s still in the sweet spot for potential big gains after a fairly recent IPO. It went public in 2018. You can scroll back on MarketBeat’s Cactus chart and see a history of volatile trade. The stock has a beta of 1.31, indicating that it’s more volatile than the broader market.

Volatility Often Leads To Price Gains

However, that’s not surprising to see with a company whose market capitalization of $4.19 billion, and which has only been public for five years. Volatility in any stock can be vexing for shareholders, but can also contribute to better-than-average upside potential. 

After Cactus reported second-quarter results on August 7, the stock chopped around a bit, but rallied to a six-month high of $53.85 on August 9, then pulled back in tandem with the broader energy sector.

The stock hasn’t yet formed a base, as its pullback has only lasted four weeks. Shares are trading less than 2% from its previous high. 

MarketBeat’s Cactus analyst ratings show a consensus view of “hold.” 

However, after the most recent earnings report, which beat top- and bottom-line views, three analysts boosted their price targets, and one reiterated a “buy” rating. Analysts see an 8.50% upside in the stock. 

The article "Are Mid-Caps Tidewater And Cactus Among New Energy Leaders?" first appeared on MarketBeat.