Shares of infrastructure construction company
) slumped nearly 11% after the company lowered its outlook for the
second quarter of 2014 on June 2. The stock has fallen to a 5-month
low of $31.30 and finally closed at $32.06.
Notably, MasTec reduced its second quarter earnings per share (EPS)
to 40 cents from 53 cents and cut revenue guidance to around $1.1
billion from the previous range of $1.15-$1.2 billion.
Management charged the weak outlook on unexpected delays in
wireless project spending and weaker than expected performance of
oil and gas segment. The company also lowered its adjusted earnings
before interest, taxes, depreciation and amortization (EBITDA)
outlook to $105 million from $124 million.
MasTec expects wireless project revenues to decline in the second
quarter as various planned projects were deferred and or reduced in
scope. The company reported an inventory balance of $89 million as
of Mar 31, 2014 from $70 million as of Dec 31, 2013, primarily due
to increases in wireless project inventories resulting from delays
These unexpected revenue declines will negatively affect segment
results reflecting the effect of reduced absorption of non-variable
indirect and overhead costs. In addition, the company foresees that
additional changes to levels of second half 2014 wireless project
spending may also occur, although the level of potential changes
cannot yet be estimated.
In oil and gas front, the company also predicts weaker segment
results also due to delays in project start up during the quarter.
Pricing pressure on current quarter short-term, mid-stream pipeline
activity will also hurt the results.
Though management anticipates that oil and gas revenue levels will
grow in the second quarter compared with last year, growth levels
are expected to be lower than previous estimates, impacting
anticipated second quarter oil and gas segment revenues by about
Wireless and oil & gas pipeline are the main growth catalysts
for MasTec. The company remains well positioned for growth in Oil
& Gas, Wireless, Electrical Transmission and wireline/1 gigabit
fiber. However, real-time and short-term changes in wireless
business will hurt profitability.
Coral Gables, FL-based MasTec is a leading infrastructure
construction company that operates primarily in North America and
caters to a range of industries. Its services include engineering,
building, installation, maintenance and upgrade of energy, utility
and communications infrastructure as well as industrial
At present, MasTec has a Zacks Rank #3 (Hold). Some better-ranked
stocks in the building and heavy construction industry include
EMCOR Group Inc.
Sterling Construction Co. Inc.
Tutor Perini Corp.
). All these stocks carry a Zacks Rank #2 (Buy).
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