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MasTec, Inc.’s (MTZ - Analyst Report) adjusted earnings increased 21% to 47 cents per share in the second quarter of 2013 from 39 cents a share in the year-ago quarter. The results were ahead of both the Zacks Consensus Estimate of 43 cents as well as management’s guidance of 42 cents a share.

Including one time items, earnings grew 11% to 42 cents per share from the prior-year quarter’s earnings of 38 cents.

Operational Update

MasTec’s net sales dropped 1% year on year to $978 million in the quarter, but it exceeded the company guidance of $950 million and also beat the Zacks Consensus Estimate of $965 million. Revenues in the Electrical Transmission segment increased 33% year over year, Communications revenues were up 15% and Oil and Gas sales increased 13%. However, revenues at the Power Generation and Industrial segment were affected by $135 million due to lower wind farm construction work related to uncertainties over the extension of wind-farm tax benefits that were not resolved until the end of 2012.

Cost of sales went down 5% to $823 million in the reported quarter. Gross profit improved 29% to $154 million from the year-ago quarter. Gross margin expanded 370 basis points (bps) year over year to 15.9% in the quarter.

General and administrative expenses increased 35% to $51.9 million in the quarter. Operating profit improved 15% to $69.5 million in the quarter from $60.2 million in the prior-year quarter. Consequently, operating margin expanded 100 bps year over year to 7.1%.

Adjusted EBITDA (Earnings before interest, tax, depreciation and amortization) was $110 million in the reported quarter, a y-o-y increase of 31%. Adjusted EBITDA margin expanded 280 basis points to 11.2% from 8.4% in the year-ago quarter.

Financial Details

Cash and cash equivalents were $13.6 million as of Jun 30, 2013 compared with $16.8 million as of Jun 30, 2012. Cash flow from operating activities was $14.6 million in the first half of 2013 compared with an outflow of $16.8 million in the prior-year comparable period. Long-term debt amounted to $806 million as of Jun 30, 2013, compared with $546 million as of Dec 31, 2012. The debt-to-capitalization ratio expanded to 46.7% as of Jun 30, 2013 from 38.8% as of Dec 31, 2012.

Backlog was $4.1 billion at the end of the quarter, a 34% increase from $3.1 billion at the end of the year-ago quarter. The growth was led by the Oil and Gas and Electrical Transmission segments.


For the full year 2013, MasTec expects revenues to be around $4.15 billion and adjusted EBITDA of $448 million. MasTec now expects adjusted earnings per share to be $1.88, representing an annual increase of 23%. MasTec expects improved cash flow and a reduction in net debt of $100 million or more over the remainder of the year.

For the third-quarter of 2013, the company projected about $1.15 billion of revenues, continuing operations EBITDA is estimated to be $135 million and diluted earnings per share from continuing operations is expected to be around 60 cents.

Coral Gables, Fla.-based MasTec is a leading infrastructure construction company operating mainly throughout North America across a range of industries. Its activities include engineering, building, installation, maintenance and upgrade of energy, utility and communications infrastructure and industrial infrastructure.

MasTec has a Zacks Rank #3 (Hold).

Peer Performance

MasTec’s peer Chicago Bridge & Iron Company N.V. (CBI - Analyst Report) reported second-quarter 2013 adjusted earnings of $1.04 per share, in line with the Zacks Consensus Estimate, but up 38.6% year over year on the back of strong project activities and robust backlog during the quarter.

EMCOR Group Inc. (EME - Analyst Report) second-quarter 2013 adjusted earnings dipped 4% to 48 cents from 50 cents in the year-ago quarter. Adjusted earnings also fell short of the Zacks Consensus Estimate of 53 cents.

Granite Construction Incorporated’s (GVA - Snapshot Report) second quarter earnings increased 40% year on year to 7 cents a share, but were way behind the Zacks Consensus Estimate of 32 cents.

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