Quanta Services: Oil & Gas Market Volatility a Concern - Analyst Blog

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We have issued an updated research report on Quanta Services Inc.PWR on Apr 15, 2015. The company has currently been on an acquisition spree, with three companies bought in the first two months of 2015 for a total value of $36.3 million. Also, Quanta Services purchased nine businesses last year, which includes Banister Pipelines Corp. bought in the fourth quarter.

Moreover, Quanta Services is benefiting from increased spending in the Electric Power segment on projects to upgrade and deploy electric power transmission infrastructure so as to improve system reliability and deliver renewable electricity from new generation sources to demand centers. Favorable industry legislation and other favorable macroeconomic factors are driving growth and the segment is expected to continue to score high going forward in 2015 and beyond.

However, although the current volatility in the oil and gas market did not affect the company's fourth-quarter results, it is expected to negatively affect Quanta Services financials, if prices hover around the bottom for an extended period. Also, Quanta Services is facing midstream gathering and mainline infrastructure bottlenecks in North America, even at the time of smooth oil and gas market scenario. With Quanta Services being one of the largest full-service providers of oil and gas infrastructure services in North America, the company expects the problem in North America to further widen going forward.

Moreover, Quanta Services pointed out that its first half and often the first quarter of every year is the largely affected by seasonal weather conditions. In the first quarter of 2015, the company expects to witness threats due to substantial precipitation in the form of snow, ice and, in some cases, rain. Severely cold and rainy weather leads to decreased productivity of projects resulting in increased costs and reduced volumes. Hence, the company projects margins in its electric power segment in the quarter to be slightly impacted by this.

Echoing similar sentiments, over the last 60 days, the Zacks Consensus Estimate for 2015 and 2016 earnings per share declined by 6.1% and 2.8%, respectively to $2.15 and $2.47, respectively. Consequently, the company currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked stocks in the industry include Dycom Industries Inc. DY , A.O. Smith Corp. AOS and RBC Bearings Inc. ROLL . While Dycom and RBC Bearings carry a Zacks Rank #1 (Strong Buy), A.O. Smith has a Zacks Rank #2 (Buy).

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SMITH (AO) CORP (AOS): Free Stock Analysis Report

QUANTA SERVICES (PWR): Free Stock Analysis Report

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DYCOM INDS (DY): Free Stock Analysis Report

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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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