On May 5, 2013 we upgraded specialty contracting services and
infrastructure solution provider,
Quanta Services Inc.
) to Outperform based on its improved prospects. Quanta Services,
which focuses on specialty contracting services, and is one of
the largest contractors serving the transmission and distribution
sector of the North American electric utility industry, became a
Zacks Rank #2 (Buy) stock shortly after reporting impressive
first quarter 2013 results.
Why the Upgrade?
First quarter 2013 non-GAAP earnings came in at 38 cents a
share, up 31.0% from the Zacks Consensus Estimate of 29 cents a
share. The reported figure was also 46.2% higher than the
prior-year quarter. Over the past four quarters, Quanta Services
has delivered an average surprise of 26.32%.
Following the release of first quarter results, the Zacks
Consensus Estimate for 2013 earnings has gone up 1.4% to $1.46
What drives this strong positive bias on the company? Apart
from impressive first quarter results, Quanta Services' growth
story looks compelling. Quanta Services is benefiting from strong
demand for its services and continued solid project
Quanta Services stands to gain from increased spending in the
Electric Power segment. Projects necessitating the upgrade and
deployment of electric power transmission infrastructure to
improve system reliability and to deliver renewable electricity
from new generation sources to demand centers are on the
Favorable industry legislation is also generating incentives
and a positive environment for utilities to invest in their
electrical infrastructure, particularly transmission
infrastructure. The company's Electric Power segment continues to
win large electric transmission projects and is expected to
derive significant benefit from transmission build-out in the US
and Canada, leading to strong backlog in 2012 and beyond. Total
backlog at the end of 2012 stood at $7.2 billion.
In addition, Quanta's Natural Gas and Pipeline Infrastructure
Services segment and the Fiber Optic segments are also performing
Other Stocks to Consider
Besides Quanta Services, other stocks in the utilities and
natural gas and pipeline sector that are currently performing
Chicago Bridge & Iron
Honeywell International Inc.
), all having Zacks Rank #2 (Buy).
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