MasTec Wins 2018 Pipeline Construction Project Worth $1.5B

MasTec, Inc.MTZ secured a large project pipeline construction award with an expected contract value of over $1.5 billion. Following the news, the company's shares jumped 4% on Oct 16.

Construction is expected to start in 2018. This opens up significant multi-year opportunities for large pipeline construction project activity in the United States. The company had previously indicated that Oil & Gas segment backlog at 2017 end will be on par or surpass 2016 levels. MasTec stated that it has received oil and gas awards recently to the tune of around $2 billion. It will provide further information regarding activity in its large project pipeline market during its third-quarter earnings call in early November.

Record Oil & Gas Activity in Q2

MasTec had delivered record second-quarter 2017 adjusted earnings per share of $1.03, comfortably beating the Zacks Consensus Estimate of 66 cents. Earnings also surged an impressive 186% year over year. The better-than-expected performance was particularly led by record levels of Oil & Gas project activity. The company's net sales surged 53% year over year to record $1.89 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.49 billion. The Oil and Gas segment which contributed 60% of its revenues in the reported quarter, also soared a whopping 168% to $1.1 billion over last year's second-quarter level.

Backed by record levels of Oil & Gas project activity, MasTec had hiked 2017 guidance during the second-quarter conference call. The company currently estimates 2017 annual revenues of approximately $6.0 billion, up from the prior projection of $5.7 billion. Compared with the revenues of $5.7 billion in the 2016, the guidance reflects a year-over-year improvement of 5%. Annual adjusted EBITDA is now projected to increase 30% on a year-over-year basis to $620 million, up from the prior projection of $575 million. Adjusted earnings per share are anticipated to be around $2.73, up from the previous guidance of $2.45, a 44% increase over 2016.

Segments Poised for Growth

In wireline and wireless communication markets, MasTec anticipates significant expansion related to both 5G and fiber deployment which signal strong prospects for its communications business. Every major carrier has publicly disclosed plans and initiatives for 5G. In its wireline markets, fiber expansion continues to be a catalyst. The company anticipates significant opportunities related to gigabit broadband initiatives, along with fiber deployment. Verizon Communications Inc. VZ inked a significant deal with Corning Incorporated GLW to secure over 37 million miles of fiber cable material over the next three years.

MasTec expects strong nationwide fiber deployment projects from both telephone companies and cable TV companies that will provide it with significant opportunities over the coming years. Also, AT&T Inc. T was recently awarded by FirstNet to build a national public safety wireless broadband network. This will have a multiyear positive impact on MasTec's business in early 2018. In the last four months, MasTec received fiber projects awards worth $750 million. Backed by this momentum, the company expects future awards to be the likely long-term growth drivers.

For Electrical Transmission business, MasTec expects continued improvement in results during 2017. The company foresees 2017 as a transitional year for this segment with anticipated improvement in end market. It also expects to witness large industry awards in the business, leading to a much improved environment in 2018 and beyond.

Acquisitions to be Catalysts

The company will also benefit from its recent acquisitions. MasTec acquired SEFNCO Communications, Inc., a telecommunications service provider primarily servicing the cable TV industry in the West Coast. This will expand MasTec's geographic and customer capacity in the wireline/fiber deployment market. The buyout will also considerably expand the company's wireline construction abilities in a geography where its customer exposure was limited.

In the second quarter, MasTec acquired Texas-based infrastructure construction company, Cash Construction that will provide exposure to growing water market. MasTec also acquired a leasing company of Oil & Gas specialty pipeline equipment. In addition to aiding the company prune overall equipment costs, the buyout will provide a competitive advantage during the current multi-year cycle of significant Oil & Gas pipeline project activity, which is anticipated to continue at record levels. Further, the geographic expansion of heavy civil operations, as well as entry into the water, sewer and drainage systems infrastructure market operations will provide opportunity to capitalize on the increasing demand trends in this market.

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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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