MasTec (MTZ) Beats Q2 Earnings Estimates, Raises Guidance

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MasTec, Inc.MTZ reported mixed results in the second quarter of 2018, wherein earnings surpassed analysts' expectations while revenues lagged the same.

Adjusted earnings of $1.04 per share surpassed both the Zacks Consensus Estimate and prior-year quarter's figure of $1.03 by 1%. The improvement in earnings is attributed to lower costs and expenses.

Quarterly revenues of $1.6 billion missed the consensus estimate of $1.8 billion by 9.5%. Revenues also declined 14% year over year, primarily due to anticipated timing variances in large project activity in the Oil & Gas segment.

Operational Update

Cost of revenues in the quarter decreased 16% year over year to $1.4 billion. General and administrative expenses declined 4.5% to $67.6 million.

Adjusted EBITDA was $191.1 million in the reported quarter compared with $202.3 million in the prior-year quarter. Adjusted EBITDA margin increased 110 basis points (bps) to 11.8% from the year-ago quarter. This was backed by improved performance in its Oil & Gas and Communications segments.

Backlog Details

The company's backlog as of Jun 30, 2018 was $7.7 billion, which increased from $168 million sequentially and 47% or $2.5 billion from a year ago.

MasTec, Inc. Price, Consensus and EPS Surprise

MasTec, Inc. Price, Consensus and EPS Surprise | MasTec, Inc. Quote

Segment Update

The Power Generation and Industrial 's revenues surged 140.5% year over year to $146 million. However, adjusted EBITDA margin decreased 110 bps to 6.7% from the prior-year quarter.

Also, the Communications revenues grew 4.5% to $618.6 million year over year. Adjusted EBITDA margin increased 180 bps to 11.9%.

However, revenues from the Oil and Gas segment dropped 32.5% year over year to $769.3. Adjusted EBITDA margin increased 240 bps to 15.9%.

Electrical Transmission segment recorded a 12.5% decline in revenues to $84.5 million in the reported quarter.

Financial Details

MasTec reported cash and cash equivalents of $20.7 million at the end of the current quarter compared with $18.2 million at the end of the prior-year quarter. Long-term debt was $1.5 billion as of Jun 30, 2018 compared with $1.3 million on Dec 31, 2017.

Net cash flow provided by operations was $23.2 million in the first half of 2018 compared with $100.2 million recorded a year ago.


For full-year 2018, the company retained its revenue guidance of approximately $6.9 billion.

Coming to non-GAAP measures, adjusted EBITDA is expected to be approximately $708 million or 10.3% of the revenues compared with $700 million or 10.2% of the revenues expected earlier. Adjusted earnings are expected at $3.67 from prior expectation of $3.65.

For the third quarter of 2018, based on updated scheduled projects for large Oil & Gas project activity, the company expects revenues of roughly $2.0 billion. Adjusted EBITDA is expected to be approximately $220 million, with adjusted earnings likely to come in at $1.26 per share.

Share Price Performance

MasTec has outperformed its industry so far this year. The stock has gained around 3.3% against its industry's decline of 10.8 % in the said period.

Zacks Rank & Key Picks

MasTec currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Granite Construction Incorporated GVA , Orion Group Holdings, Inc. ORN and EMCOR Group, Inc. EME . While Granite Construction sports a Zacks Rank #1 (Strong Buy), both Orion Group and EMCOR carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Granite Construction has an expected current-year earnings growth rate of 111.1%.

Orion Group's expected 2018 earnings growth rate is 321.43%.

EMCOR is expected to register an EPS growth rate of 15% this year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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