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1. Company Snapshot

1.a. Company Description

Dril-Quip, Inc., together with its subsidiaries, designs, manufactures, sells, and services engineered drilling and production equipment for use in deepwater, harsh environment, and severe service applications worldwide.The company's principal products include subsea and surface wellheads, subsea and surface production trees, mudline hanger systems, specialty connectors and associated pipes, drilling and production riser systems, liner hangers, wellhead connectors, diverters, and safety valves, as well as downhole tools.It also provides technical advisory services, and rework and reconditioning services, as well as rental and purchase of running tools for use in the installation and retrieval of its products; and downhole tools comprise of liner hangers, production packers, safety valves, and specialty downhole tools that are used to hang-off and seal casing into a previously installed casing string in the well bore.


The company's products are used to explore for oil and gas from offshore drilling rigs, such as floating rigs and jack-up rigs; and for drilling and production of oil and gas wells on offshore platforms, tension leg platforms, and Spars, as well as moored vessels, such as floating production, storage, and offloading monohull moored vessels.It sells its products directly through its sales personnel, independent sales agents, and representatives to integrated, independent, and foreign national oil and gas companies, as well as drilling contractors, and engineering and construction companies.The company was founded in 1981 and is headquartered in Houston, Texas.

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1.b. Last Insights on DRQ

The recent performance of Dril-Quip, Inc. was negatively driven by the company's announcement of an error in the classification of certain inventory write-downs from 2021. This revelation led to investigations by law firms, including Bronstein, Gewirtz & Grossman, LLC, and Levi & Korsinsky, which may potentially impact the company's financial performance. The error may have resulted in misstated financial results, causing uncertainty and volatility in the market. The company's failure to accurately report its financials may have also led to a loss of investor confidence, further exacerbating the negative sentiment.

1.c. Company Highlights

2. Innovex Delivers Mixed Q1 Results Amidst Market Volatility

Innovex reported mixed financial performance in its Q1 2025 earnings, with revenue of $240 million, up 88% year-over-year but down 4% sequentially. Adjusted EBITDA came in at $46 million, with free cash flow of $24 million, representing 52% of EBITDA. The company missed earnings estimates, with an actual EPS of -0.15 compared to the expected 0.25. Despite this, Innovex maintained flat margins and demonstrated its ability to generate significant free cash flow, even in a challenging environment. CFO Kendal Reed noted, "Our countercyclical cash flow profile and strong balance sheet position us to invest in M&A or share buybacks."

Publication Date: Jul -10

📋 Highlights
  • North America Land Growth: Revenue rose 17% sequentially, driven by DWS integration and Canadian seasonal growth.
  • International and Offshore Decline: Revenue fell 19% due to weakness in Mexico and U.S. offshore seasonality.
  • Free Cash Flow Generation: Generated $24 million in free cash flow, representing 52% of adjusted EBITDA.
  • Strategic Acquisition: Acquired SCF Machining in Vietnam to diversify supply chain and mitigate tariff risks.
  • Eldridge Facility Sale: Sold the facility for $95 million, expected to close by end of 2025, freeing capital for growth.

Operational Highlights

The company saw strong growth in North America land revenue, which rose 17% sequentially to $121 million, driven by the DWS integration and Canadian seasonal growth. However, international and offshore revenue declined 19% to $120 million, primarily due to weakness in Mexico and U.S. offshore seasonality. Innovex also reported progress in its subsea business, with on-time delivery improving to 72% from below 50% at the time of the merger.

Strategic Initiatives

Innovex continues to execute on its strategic initiatives, including the acquisition of SCF Machining in Vietnam to diversify its supply chain and mitigate tariff risks. The sale of the Eldridge facility for $95 million is expected to close by the end of 2025, freeing up capital for growth initiatives. The company also highlighted success with its VXTE tree technology, which has generated significant customer interest due to its ability to reduce installation time by up to seven days.

Valuation and Outlook

With a P/E ratio of 8.73 and a P/S ratio of 1.45, Innovex appears to be trading at a reasonable valuation given its growth prospects and strong free cash flow generation. The company’s free cash flow yield of 5.18% further underscores its attractive risk-reward profile. Looking ahead, Innovex expects Q2 adjusted EBITDA of $40-$45 million and revenue of $225-$235 million, reflecting continued challenges in Mexico and the spring breakup in Canada. Analysts estimate 5.0% revenue growth for next year, positioning Innovex well to navigate the current market volatility and deliver long-term value creation.

3. NewsRoom

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Brandes Investment Partners, LP Exits Position in Dril-Quip Inc

Oct -07

Source: gurufocus.com

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Dril-Quip Inc (DRQ) Trading 3.32% Higher on Oct 2

Oct -02

Source: gurufocus.com

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The Schall Law Firm Is Looking Into Whether Dril-Quip, Inc. Violated Securities Regulations And Shareholders Are Urged To Assist

Sep -11

Source: accesswire.com

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The Schall Law Firm Invites Investors To Participate In An Investigation Into Dril-Quip Inc For Possible Fraud

Sep -07

Source: accesswire.com

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Innovex and Dril-Quip Complete Merger, Creating Unique Energy Industrial Platform

Sep -06

Source: accesswire.com

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Dril-Quip, Inc. May Have Violated Securities Regulations And Shareholders Are Encouraged To Join The Schall Law Firm's Inquiry

Sep -06

Source: accesswire.com

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The Schall Law Firm Is Looking Into Whether Dril-Quip Inc Committed Securities Fraud And Affected Investors Can Reach Out

Sep -05

Source: accesswire.com

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Dril-Quip Inc. May Have Violated Securities Regulations And Shareholders Should Join The Schall Law Firm's Investigation

Sep -04

Source: accesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.35%)

6. Segments

Subsea Products

Expected Growth: 10%

Dril-Quip's Subsea Products segment growth is driven by increasing deepwater exploration and production activities, rising demand for high-pressure and high-temperature equipment, and growing adoption of subsea well intervention systems. Additionally, the company's focus on innovative product development, strategic partnerships, and expanding presence in key regions contribute to its 10% growth.

Well Construction

Expected Growth: 12%

Dril-Quip's Well Construction segment growth is driven by increasing demand for deepwater and subsea drilling, rising oil prices, and growing adoption of advanced drilling technologies. Additionally, the company's strategic acquisitions and partnerships have expanded its product offerings and geographic reach, contributing to the 12% growth rate.

Subsea Services

Expected Growth: 9%

Dril-Quip's Subsea Services segment growth is driven by increasing deepwater exploration and production activities, rising demand for high-pressure and high-temperature equipment, and growing adoption of subsea well intervention and completion services. Additionally, the company's strategic partnerships, innovative product offerings, and expanding presence in key regions contribute to its 9% growth.

7. Detailed Products

Wellhead Systems

Dril-Quip's wellhead systems provide a safe and reliable connection between the wellbore and the surface, enabling efficient and controlled production.

Subsea Production Systems

Dril-Quip's subsea production systems enable the safe and efficient extraction of hydrocarbons from subsea wells, providing a reliable connection between the wellbore and the production facility.

Riser Systems

Dril-Quip's riser systems provide a safe and reliable connection between the subsea well and the production facility, enabling the efficient extraction of hydrocarbons.

Downhole Tools

Dril-Quip's downhole tools provide a range of solutions for drilling, completion, and production operations, enabling efficient and safe operations.

Surface Production Equipment

Dril-Quip's surface production equipment provides a range of solutions for oil and gas production, enabling efficient and safe operations.

8. Dril-Quip, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Dril-Quip, Inc. faces moderate threat from substitutes due to the availability of alternative products and services in the oil and gas industry.

Bargaining Power Of Customers

Dril-Quip, Inc. has a diverse customer base, which reduces the bargaining power of individual customers, resulting in a low threat.

Bargaining Power Of Suppliers

Dril-Quip, Inc. relies on a few key suppliers for critical components, which gives them some bargaining power, but the company's size and reputation mitigate this threat.

Threat Of New Entrants

The oil and gas industry has high barriers to entry, including significant capital requirements and regulatory hurdles, which reduces the threat of new entrants.

Intensity Of Rivalry

The oil and gas industry is highly competitive, with many established players competing for market share, resulting in a high level of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 1.88%
Debt Cost 3.95%
Equity Weight 98.12%
Equity Cost 8.44%
WACC 8.36%
Leverage 1.91%

11. Quality Control: Dril-Quip, Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Forum Energy Technologies

A-Score: 4.9/10

Value: 9.0

Growth: 3.1

Quality: 4.2

Yield: 0.0

Momentum: 10.0

Volatility: 3.3

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Dril-Quip

A-Score: 4.7/10

Value: 6.8

Growth: 6.3

Quality: 7.9

Yield: 0.0

Momentum: 5.0

Volatility: 2.3

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Value: 6.3

Growth: 3.9

Quality: 4.6

Yield: 0.0

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Flotek

A-Score: 3.8/10

Value: 1.5

Growth: 5.0

Quality: 4.7

Yield: 0.0

Momentum: 10.0

Volatility: 1.3

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KLX Energy Services Holdings

A-Score: 3.1/10

Value: 9.8

Growth: 4.2

Quality: 3.7

Yield: 0.0

Momentum: 0.0

Volatility: 1.0

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ProFrac

A-Score: 2.8/10

Value: 8.7

Growth: 4.0

Quality: 2.0

Yield: 0.0

Momentum: 1.0

Volatility: 1.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

15.41$

Current Price

15.41$

Potential

-0.00%

Expected Cash-Flows