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Quanta Services Inc. (PWR - Analyst Report) reported third-quarter 2013 non-GAAP earnings (excluding the one-time items) of 46 cents a share, beating the Zacks Consensus Estimate by 15% and improving 9.5% from the prior-year quarter. Profits were primarily driven by increasing demand for the company’s services.
GAAP earnings per share were 43 cents, up 10.3% year on year.
Total revenue for the quarter was $1.65 billion, up 7.8% from $1.53 billion in the prior-year quarter, aided by increased revenues from the company’s Electric Power Infrastructure Services segment. Quanta reported revenue growth only in one of its three operating segments.
Electric Power revenues in the quarter were $1.05 billion, down 3.7% from $1.09 billion in the prior-year period. The Electric Power segment continued to experience increased demand for electric transmission and distribution services, as the electric power industry is investing at record levels to upgrade and modernize North America's power grid. In addition, regulations to improve Red reliability, renewable interconnections, and the impact of switching to gas generation are expected to continue to drive the power industry's investments and electric infrastructure over the long term.
However, all this was offset by a $57-million decrease quarter-over-quarter in emergency restoration services, with approximately $18.6 million occurring in the third quarter of 2013 compared with $75.1 million in the third quarter of 2012. Additionally, revenues during the quarter were negatively impacted by a decline in activity related to renewable energy projects, as the prior year's third quarter had substantial contributions from a large-scale solar project. The segment had a backlog of $2.9 billion compared with $5.3 billion in the prior-year period.
Natural Gas and Pipeline revenues came in at $552.3 million, reflecting a 40.1% year-over-year increase. This growth was driven by increased revenues from projects related to unconventional shale developments in certain regions of North America. Revenues for the third quarter of 2013 were also favorably impacted by the contribution of approximately $56 million in revenues from the acquisition of Nacap in late Jul 2013. The segment had a backlog of $1.30 billion compared with $2.2 billion in the prior-year period.
Fiber Optic Licensing revenues declined 9.8% to $44.3 million from $49.2 million in the comparable quarter last year. The decline in revenues was primarily attributable to decline in telecom service revenues. The segment had a backlog of $141 million compared with $545 million in the prior-year quarter.
Income and Expenses
Operating income in the quarter was $141.1 million compared with $127.1 million in the prior-year quarter, reflecting an increase of 11%. SG&A expense was $125 million compared with $115 million in the comparable quarter last year.
Cash Flow and Balance Sheet
Cash and cash equivalents at the end of the quarter were $309.1 million and shareholders’ equity was $4.0 billion.
Operating cash flow from continuing operations was about $83 million for the third quarter of 2013 compared with $47 million for the third quarter of 2012. Capital expenditures were about $47 million, while free cash flow for the third quarter was approximately $37 million. This compares with $112 million in negative free cash flow for the third quarter of 2012.
On Oct 30, Quanta Services increased its credit limit to $1.3 billion from $700 million, with an amendment to its senior secured revolving credit facility. The increase in its credit capability was primarily to lower its costs and expand its borrowing capabilities.
Quanta is positive about its performance going forward. Quanta expect revenues for the fourth quarter of 2013 to be in the range of $1.65 billion - $1.75 billion. Non-GAAP earnings for the quarter are projected in the range of 42 cents - 44 cents.
Quanta currently has a Zacks Rank #3 (Hold). However some other players operating in the same industry and worth considering are Jacobs Engineering Group Inc. (JEC - Analyst Report), Tyco International Ltd. (TYC - Analyst Report) and Hutchison Whampoa Limited (HUWHY). All three carry a Zacks Rank #2 (Buy).