On Mar 27, 2014, we issued an updated research report on
Quanta Services Inc.
). The company had earlier reported better-than-expected
quarterly results. Quanta benefited from increased spending on
projects in the Electric Power segment to upgrade and deploy the
electric power transmission infrastructure to improve system
reliability and to deliver renewable electricity from new
generation sources to demand centers. The company's oil and gas
infrastructure services segment continues to perform well with
significant revenue growth.
Quanta has delivered positive earnings surprises in all of the
last four quarters, with an average beat of 12.9%. It delivered
robust earnings in the fourth quarter of fiscal 2013, which was
17.1% above the Zacks Consensus Estimate.
Additionally, management provided an encouraging outlook for
fiscal 2014. Quanta is positive about its performance going
forward. It expects revenues for the first quarter of 2014 in the
range of $1.65 billion to $1.75 billion. On a GAAP basis, the
company expects earnings to be in the range of 36 cents to 38
Further, for full-year 2014, revenues are expected in the
range of $7.4 billion to $7.8 billion, while earnings on GAAP
basis are expected in the range of $1.65 to $1.85 per share.
Excluding the one-time items, non-GAAP adjusted earnings for
2014 are expected to be between $1.85 and $2.05 per share,
compared with $1.71 per share in 2013.
The company's Electric Power segment continues to win large
electric transmission projects and is expected to derive
significant benefit from the transmission business. The company
is also benefiting from the aging electric infrastructure that
requires increased spending for maintenance to meet the
reliability standards. Also, the rapid adaptation of the smart
grid technology is expected to leverage the segment's business
Additionally, Quanta Services is one of the largest
full-service providers of oil and gas infrastructure services in
North America and is well placed to seize opportunities, driven
by the development and production of resources from
unconventional shale developments and Canadian oil sands.
Development activity for gathering system infrastructure in
liquid-rich shale is strong, and there are indications that
demand for its transmission pipeline services had increased
significantly in 2013 and the uptrend is likely to continue in
2014. In 2013, the company had benefited from the projects
related to unconventional shale developments in certain regions
of North America. Its pipeline-gathering activity has also
remained active and the company experienced increased demand for
its mainline pipe construction services in 2013 and booked more
than $700 million in contracts during the second half of
However, the competitive nature of the industry and stringent
regulatory and permit hurdles along with weak performance of the
fiber optics business due to fluctuations in telecom services
revenues are some of the headwinds the company faces.
Quanta currently carries a Zacks Rank #2 (Buy).
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