On Jan 13, 2015, Zacks Investment Research downgraded MasTec, Inc. ( MTZ ), the infrastructure construction company, to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Shares of MasTec have witnessed downward movement and dropped over 4% subsequent to the company's decision to cut its 2015 outlook based on potential impact of the slump in global oil prices and expected lower levels of wireless project activity.
On Dec 17, 2014, MasTec slashed its revenue growth guidance for 2015 to 9% from the previous range of 13-17%. The company also reduced its continuing operations adjusted diluted earnings per share expectation from the range of $2.00-$2.15 to $1.87.
Notably, MasTec's shares lost nearly 4% yesterday and closed at $19.83 following the drop in broader indexes, including Dow Jones Industrial Index and The Standard & Poor's 500 Index, with energy producers occupying the leading position, as WTI Crude Oil slid more than 4%. An MSCI index of developing-nation energy companies also fell 2%.
The recent plunge in oil prices is hurting the energy market. While cheaper oil is a boon to packaging, stores and restaurants companies, it is a drag for building, construction and mining companies like Caterpillar Inc. ( CAT ), Terex Corp. ( TEX ) and United Rentals, Inc. ( URI ) along with MasTec.
On Oct 30, 2014 MasTec reported third-quarter 2014 adjusted earnings of 53 cents per share, declining over 10% year over year. Earnings were in line with the Zacks Consensus Estimate but below management's guidance of 56 cents.
Following the third quarter, MasTec acquired WesTower, which will create strong growth opportunities for the company. However, the impact of acquisition integration expense will be roughly $20 million, with $10 million to be incurred in the fourth quarter of 2014 and the balance during 2015.
Following the third-quarter earnings announcement, the Zacks Consensus Estimate for MasTec dropped 1.4% to $1.44 per share for 2014 and 15% to $1.76 a share for 2015.