MasTec, Inc. (MTZ)

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MasTec (MTZ)

Q3 2013 Earnings Call

November 01, 2013 9:00 am ET

Executives

J. Marc Lewis - Vice President of Investor Relations

Jose Ramon Mas - Chief Executive Officer and Director

C. Robert Campbell - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Andrew Kaplowitz - Barclays Capital, Research Division

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

Jason A. Wangler - Wunderlich Securities Inc., Research Division

Vishal Shah - Deutsche Bank AG, Research Division

John B. Rogers - D.A. Davidson & Co., Research Division

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

William D. Bremer - Maxim Group LLC, Research Division

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Presentation

Operator

Welcome to the MasTec's Third Quarter Fiscal Year 2013 Earnings Conference Call, initially broadcast on November 1, 2013. Let me remind participants that today's call is being recorded. At this time, I would like to turn the call over to Mr. Marc Lewis, MasTec's Vice President of Investor Relations. Marc?

J. Marc Lewis

Thank you, Mary, and good morning, everyone. Welcome to MasTec's third quarter earnings conference call. The following statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. In these communications, we may make certain statements that are forward-looking, such as statements regarding MasTec's future results, plans and anticipated trends in the industries where we operate. These forward-looking statements are the company's expectations on the day of the initial broadcast of this conference call, and the company will make no effort to update these expectations based on subsequent events or knowledge.

Various risks, uncertainties and assumptions are detailed in our press releases and filings with the SEC. Should one or more of these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in these communications.

In today's remarks by management, we will be discussing continuing operations adjusted financial metrics as discussed and reconciled in yesterday's press release and supporting schedules.

In addition, we may use certain non-GAAP financial measures in this conference call. A reconciliation of any non-GAAP financial measures not reconciled in these comments to the most comparable GAAP measure can be found in our recent earnings press release, our 10-Q and on our Investor Relations site at mastec.com.

With us today, we have Jose Mas, our Chief Executive Officer; and Bob Campbell, our Executive Vice President and Chief Financial Officer. The format of the call will be opening remarks and analysis by Jose, followed by financial review from Bob. These discussions will be followed by a question-and-answer period, and we expect the call to last about 60 minutes.

We had another record quarter and a lot of good things to talk about today. So I'll go ahead and turn over to Jose.

Jose Ramon Mas

Thanks, Marc. Good morning, and welcome to MasTec's 2013 third quarter call. Today, I will be reviewing our third quarter results, as well as providing my outlook for the markets we serve.

First, some third quarter highlights. Revenue for the quarter was $1,269,000,000, an increase of 19% over last year's third quarter. Adjusted EBITDA was $135 million, an increase of 32% over the prior year's third quarter. Adjusted EBITDA margins were 10.6%, a 100 basis point improvement. Adjusted earnings per share were $0.61, an increase of 13% over last year's third quarter and cash flow from operations was $110 million.

In summary, we had an excellent quarter. In fact, the third quarter was the best quarter in the company's history. Third quarter revenue, EBITDA, net income and EPS were all at record levels.

Despite a year-over-year $127 million drop in revenues in our Power Generation business, total revenues were up $202 million. This increase was led by our oil and gas, electrical high-voltage transmission and wireless markets, which all had record revenue quarters, helping the company achieve its 19% year-over-year growth.

We are seeing the positive results of our diversification strategy and believe that every market we serve offers us long-term growth opportunities.

Today, we'll cover our financial performance. But quite frankly, our greatest success has been our ability to improve our competitive position across all of our end markets. I believe the value of our brand has never been stronger. I think today's financial performance is a testament to that. But more importantly, it's our brand recognition and reputation that will continue to provide us with growing opportunities across all of our markets.

I would now like to cover our segment data. Our Communications segment revenue was $543 million for the quarter versus $490 million last year. EBITDA margin for this segment was 13.2% for the third quarter versus 12.1% in last year's third quarter. The growth in this segment was led by our wireless business, which was up 38% year-over-year. Revenue growth in wireless has been stronger than expected and was driven by both growth from AT&T, as well as our ability to diversify our customer base, as demonstrated this quarter with the addition of Samsung in our top 10 customers. The work we do for Samsung is on behalf of the Sprint network. We expect wireless revenues to exceed $900 million in 2013.

While we have enjoyed strong growth, there are a significant number of new opportunities with multiple customers that we are pursuing, and we expect to announce additional awards during the fourth quarter.

We have invested and will continue to invest in the opening of new training facilities, the hiring and training of personnel and the equipment and systems necessary to provide our customers with the resources they will need to complete their deployments in a cost effective, timely and safe manner. Having these resources will be a key to the continued growth in our wireless business, and we are very confident in our ability to be a market leader in this business.

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