Dril-Quip (DRQ) & Innovex Forge Industry-Leading Merger

Dril-Quip, Inc. DRQ and Innovex Downhole Solutions, Inc. have announced a definitive agreement to merge, creating a unique and innovative energy platform. The all-stock transaction, disclosed in a recent press release, positions the combined entity as a frontrunner in innovation, boasting an expanded scale, diverse product portfolio and an extensive geographic footprint.

Dril-Quip, renowned for its expertise in developing, manufacturing and providing highly engineered equipment and services for the global offshore and onshore oil and gas sector, will join forces with Innovex, a global leader in providing mission-critical technologies and services across the entire well lifecycle. The merger is anticipated to yield a resilient earnings profile capable of driving value even through industry cycles.

Upon completion, Dril-Quip shareholders are expected to hold approximately 52% ownership of the combined company, with Innovex shareholders owning the remaining 48% on a fully diluted basis.

One of the key highlights of the merger is the pro forma year-end 2023 net cash position of $99 million, offering a robust financial foundation for the combined entity. Moreover, the transaction is set to immediately enhance the profitability and free cash flow generation of the pro forma company, with estimated annual cost synergies of $30 million.

In a notable leadership transition, Adam Anderson, the present CEO of Innovex, is slated to become the combined company's CEO and join its board. Meanwhile, Kendal Reed, the current CFO of Innovex, is set to assume the role of CFO for the combined company.

With a strategic eye on international and offshore markets, the combined company is expected to derive 56% of its revenues from these sectors, while 44% is projected to come from the U.S. and Canada onshore markets.

The transaction, subject to customary closing conditions and regulatory approvals, is anticipated to be completed in the third quarter of 2024.

Zacks Rank & Key Picks

Dril-Quip currently carries a Zack Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Sunoco LP SUNMurphy USA Inc. MUSA and Energy Transfer LP ET. While both Sunoco and Murphy USA sport a Zacks Rank #1 (Strong Buy) at present, Energy Transfer carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunoco is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. By distributing more than 10 fuel brands via 10,000 convenience stores under long-term distribution contracts, the partnership will continue to generate stable cash flow. 

The Zacks Consensus Estimate for SUN’s 2024 earnings per share (EPS) is pegged at $4.89. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States.

The Zacks Consensus Estimate for MUSA’s 2024 EPS is pegged at $25.58. The company has a Zacks Style Score of B for Growth and B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Energy Transfer is a publicly traded limited partnership, focused on diverse energy assets in the United States. The company’s core operations involve natural gas midstream services, transportation, storage, crude oil facilities and marketing assets.

The Zacks Consensus Estimate for ET’s 2024 earnings per unit is pegged at $1.44. The company has witnessed upward earnings estimate revisions for 2024 in the past 30 days. ET’s 2024 earnings are expected to rise 32.1% year over year.

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Dril-Quip, Inc. (DRQ) : Free Stock Analysis Report

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Murphy USA Inc. (MUSA) : Free Stock Analysis Report

Energy Transfer LP (ET) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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