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Quanta Services' (PWR) Q4 Earnings Miss, Revenues Up Y/Y

Quanta Services Inc. PWR reported fourth-quarter 2016 adjusted earnings (including adjustments for stock-based compensation expense) of 52 cents per share, which lagged the Zacks Consensus Estimate by 3.7%.

The company's non-GAAP earnings from continuing operations came in at 56 cents, up 86.7% from the prior-year quarter tally of 30 cents. The bottom-line growth is attributable to a record top line and sound execution of projects at the base electric power business.

For full-year 2016, non-GAAP earnings from continuing operations came in at $1.51, up over 36% from the year-ago quarter tally of $1.11 per share.

Inside the Headlines

Total revenue in the quarter came in at a record level of $2,103 million, up an impressive 10.7% on a year-over-year basis. However, the figure lagged the Zacks Consensus Estimate of $2,161 million marginally. The top-line growth came on the back of projects that moved into construction during the reported quarter. Robust growth of revenues at the Oil and Gas Infrastructure segment acted as the primary catalyst.

Of the total quarterly revenue, the Electric Power Infrastructure segment accounted for 61%, and the Oil and Gas Infrastructure segment represented 39%.

Segment wise, revenues from Electric Power Infrastructure edged down about 0.7% year over year to $1,282 million. However, Oil and Gas Infrastructure segmental revenues were up a whopping 35.1% to $821 million.

For 2016, the company posted revenues of $7.65 billion, up a meagre 1% year over year.

In fourth-quarter 2016, operating income came in at $117.9 million, up significantly from $3.6 million recorded in the prior-year quarter.

At year end, Quanta Services' consolidated total backlog was $9,749.8 million, up from $9,386.9 million at the end of last year.

Liquidity

Quanta Services exited the quarter with cash and cash equivalents of $112.2 million, down from $128.8 million as of Dec 31, 2015. At quarter end, the company's long-term debt and notes payable was $353.6 million, down from $475.4 million as of Dec 31, 2015.

Quanta Services, Inc. Price, Consensus and EPS Surprise

Quanta Services, Inc. Price, Consensus and EPS Surprise | Quanta Services, Inc. Quote

Notable Developments

After the end of the quarter, Alberta Powerline (a limited partnership formed by Quanta Services and ATCO Group) won the approval to construct and operate the Fort McMurray West 500 kV Transmission Project from the Alberta Utilities Commission. Construction is slated to begin in the second half of 2017, with completion expected in 2019. This is the largest project which Quanta Services has ever won and has been reflected in the company's backlog since 2015.

Guidance Cut

Concurrent with the earnings release, Quanta Services provided its full-year 2017 earnings and revenues guidance. The company projects adjusted earnings per share from continuing operations in the range of $1.80-$2.05. Quanta Services expects revenues for the year in the band of $7.9-$8.5 billion.

Our Take

Though Quanta Services' fourth-quarter earnings and revenues failed to beat estimates, the company's sturdy top-line performance signals a meaningful rebound. The Oil & Gas Infrastructure Services revenues retained their strong growth for the second consecutive quarter, after quite a few quarters of dismal performances. A gradual shift from coal to gas for power generation from commercial and residential customers has been fortifying natural gas pipeline projects, thus boosting growth.

The company focuses on the timely delivery of projects, leveraging on its core business areas to expand in complementary service lines and venturing into new service lines. Its decentralized and entrepreneurial business model has aided it in combating some of the most pressing macroeconomic challenges, driving growth in recent times.

In addition, solid rebound in its end markets, on the back of key growth drivers, like an aging grid, shifting generation mix and implementation of clean energy initiatives, bode well for long-term growth. Going forward, the company is hopeful about the multi-year growth opportunities that it has been witnessing in both electric power, and oil and gas infrastructure services markets.

Stocks to Consider

Quanta Services currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader sector include Chart Industries Inc. GTLS , II-VI Incorporated IIVI and Applied Industrial Technologies Inc. AIT .

Chart Industries has generated a whopping positive average earnings surprise of 548.5% in the trailing four quarters, beating estimates all through and currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

II-VI Incorporated, also sporting a Zacks Rank #1, has registered a remarkable positive average surprise of over 59.2% for the last four quarters, driven by four remarkable consecutive beats.

Applied Industrial Technologies carries a Zacks Rank #2 (Buy) and has managed to beat estimates thrice in the past four quarters, for a positive earnings surprise of 6.2%.

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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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