Technology

Why Is MasTec (MTZ) Up 11.4% Since Last Earnings Report?

It has been about a month since the last earnings report for MasTec (MTZ). Shares have added about 11.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MasTec due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

MasTec's Q4 Earnings Surpass Estimates, Revenues Miss

MasTec, Inc. reported mixed results in the fourth quarter of 2018, wherein earnings surpassed the Zacks Consensus Estimate, while revenues missed the same.

Adjusted earnings of $1.07 per share surpassed the consensus estimate of $1.06 by 0.9%. Also, the reported figure jumped an impressive 128% from prior-year figure of 47 cents.

Revenues of $1,918 million marginally missed the consensus mark of $1,922 million. Nonetheless, the reported figure increased 19.6% on a year-over-year basis, primarily driven by higher revenues from Power Generation and Industrial, as well as Oil and Gas.

The company’s 18-month backlog as of Dec 31, 2018 was $7.7 billion, up 9% from $7.1 billion in the corresponding period of 2017.

Segment Update

Revenues at Communications declined 1.9% year over year to $649.3 million. Adjusted EBITDA margin also contracted 200 basis points (bps) to 9.2%.

Electrical Transmission segment’s revenues came in at $99.7 million, down 1.3% from the year-ago quarter. Adjusted EBITDA margin declined 70 bps to 5.6%.

Nevertheless, Power Generation and Industrial’s revenues surged 131.7% year over year to $221.7 million. However, adjusted EBITDA margin fell 80 bps from the prior-year quarter to 7.3%.

Revenues at the Oil and Gas segment increased 28% from a year ago to $947.1 million. In addition, adjusted EBITDA margin improved an impressive 860 bps to 14.8%.

Operational Update

Cost of revenues (excluding depreciation and amortization) increased 16.3% from the year-ago period to $1.65 billion. General and administrative expenses rose 3.6% from the prior-year quarter to $75.7 million.

The company’s adjusted EBITDA came in at $195.8 million in the reported quarter compared with $128.9 million in the prior-year period. Adjusted EBITDA margin also surged 220 bps to 10.2%.

Financial Details

MasTec reported cash and cash equivalents of $27.4 million at the end of 2018 compared with $40.3 million at 2017-end. Long-term debt was $1.32 billion as of Dec 31, 2018 compared with $1.28 million in the comparable year-ago period.

Net cash flow provided by operations was $53 million as of Dec 31, 2018 compared with $144.1 million recorded at the end of 2017. The company repurchased 2.9 million shares in the fourth quarter and 7.2 million shares for approximately $319 million in 2018.

2018 Highlights

In 2018, the company’s adjusted earnings per share came in at $3.77, up 29.1% from the year-ago figure of $2.92. Revenues of $6.9 billion also increased 4.6% year over year. Its adjusted EBITDA was $721 million in 2018 compared with $645.6 million a year ago. Adjusted EBITDA margin also grew 60 bps to 10.4%.

Guidance

Full-Year 2019

For 2019, the company expects revenues to be roughly $7.6 billion. Adjusted EBITDA is projected at $780 million, with adjusted EBITDA margin of 10.3%. Adjusted earnings per share are anticipated at around $4.34.

First-Quarter 2019

For first-quarter 2019, MasTec expects revenues to be $1.4 billion. Adjusted EBITDA is expected at $126 million, reflecting an increase of 16.9% from the comparable year-ago period. Adjusted EBITDA margin is likely to be about 9%, up 130 bps from the year-ago level. Adjusted earnings per share are anticipated at 43 cents. The Zacks Consensus Estimate for the quarter is currently pegged at 55 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -23.87% due to these changes.

VGM Scores

At this time, MasTec has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, MasTec has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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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.

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