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Quanta Services (PWR) Q2 Earnings Miss by a Huge Margin
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Quanta Services Inc. (PWR - Free Report) reported bleak second-quarter 2016 adjusted earnings from continuing operations of 14 cents per share, which missed the Zacks Consensus Estimate of 32 cents by over 56%. This marks its second consecutive earnings miss, following a 9.1% negative surprise last quarter.
The company’s non-GAAP adjusted earnings stood at 18 cents, down 25% from the prior-year quarter tally of 24 cents. Apart from broad-based weakness, profits were hurt due to a host of factors like a major project loss, persistent weakness in the oil and gas segment as well as unrelenting engineering and production issues on a power plant construction project in Alaska. Wildfires in Alberta, Canada and higher-than-expected tax liability extended losses for the company.
Inside the Headlines
Total revenue in the quarter came in at $1,792.4 million, down 4.3% on a year-over-year basis. Also, the figure missed the Zacks Consensus Estimate of $1,855 million. The decline in revenues is attributable to numerous headwinds that the company is grappling with, including harsh weather, project delays, weak revenues and margins in the oil and gas segment and so on.
Of the total quarterly revenue, the Electric Power Infrastructure segment accounted for 64.7% and the Oil and Gas Infrastructure segment represented 35.3%.
Segment-wise, revenues from Electric Power Infrastructure declined about 5.2% year over year to $1,159.1 million. Oil and Gas Infrastructure segmental revenues fell 2.6% to $633.3 million.
In second-quarter 2016, operating income came in at $35.5 million, drastically down from $68.9 million recorded in the prior-year quarter.
At the quarter end, Quanta Services’ consolidated total backlog was $9,955.7 million, up from $9,150.9 million at the end of Jun 30, 2015.
Liquidity
Quanta Services exited the quarter with cash and cash equivalents of $162.3 million, up from $128.8 million as of Dec 31, 2015. On Jun 30, 2016, the company’s long-term debt and notes payable stood at $401.1 million, down from $475.3 million as of Dec 31, 2015.
Shares Repurchases
During the quarter, Quanta Services completed the company's previously announced accelerated stock repurchase arrangement and bought back around $750 million worth of shares.
Notable Developments
During the quarter, Quanta Services secured a construction contract on a new 100-mile double-circuit 345 kilovolt transmission line for a Midwest utility in its service territory. The project is expected to be completed in the third quarter of 2018.
Also, Quanta Services was selected by a California-based utility for a large electric power transmission and distribution project, subsequent to the quarter end.Quanta's scope of work in the order includes the engineering, procurement and construction of the project. The project is scheduled to be completed in late 2019.
2016 Outlook
Concurrent with the earnings release, Quanta Services updated its guidance for the full year. The company expects adjusted earnings per share from continuing operations in the range of $1.52--$1.67 (down from the previously guided range of $1.61--$1.81). Quanta Services expects revenues for the year in the band of $7.75 billion to $8 billion.
Quanta Services witnessed a dismal quarter, largely because of adverse factors like weather and regulatory issues. One of the biggest challenges for the company is obtaining the sighting and permission of energy infrastructure projects, including major electric transmission programs, and this is weighing on its profitability.
In addition to this, the current volatility in the oil and gas market, along with reduced consumer spending, has been affecting the company’s projects and orders. The Canadian economy has been severely affected by the collapse in oil prices, which in turn proved to be a significant headwind for the company’s growth momentum.
Despite these negatives, solid execution of core transmission and distribution operations is acting as a positive. Moreover, its lucrative project wins and strong backlog levels signal bright days ahead. Its top line should benefit from the expected mobilization of a number of large diameter pipeline projects. The company is also seeing increased activity in the large electric transmission project market, which bodes well for potential contract wins for the company.
Quanta Services current carries a Zacks Rank #4 (Sell). Better-ranked stocks in the same space include AECOM (ACM - Free Report) , Willdan Group, Inc. (WLDN - Free Report) and Jacobs Engineering Group Inc. , each carrying a Zacks Rank #2 (Buy).
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Quanta Services (PWR) Q2 Earnings Miss by a Huge Margin
Quanta Services Inc. (PWR - Free Report) reported bleak second-quarter 2016 adjusted earnings from continuing operations of 14 cents per share, which missed the Zacks Consensus Estimate of 32 cents by over 56%. This marks its second consecutive earnings miss, following a 9.1% negative surprise last quarter.
The company’s non-GAAP adjusted earnings stood at 18 cents, down 25% from the prior-year quarter tally of 24 cents. Apart from broad-based weakness, profits were hurt due to a host of factors like a major project loss, persistent weakness in the oil and gas segment as well as unrelenting engineering and production issues on a power plant construction project in Alaska. Wildfires in Alberta, Canada and higher-than-expected tax liability extended losses for the company.
Inside the Headlines
Total revenue in the quarter came in at $1,792.4 million, down 4.3% on a year-over-year basis. Also, the figure missed the Zacks Consensus Estimate of $1,855 million. The decline in revenues is attributable to numerous headwinds that the company is grappling with, including harsh weather, project delays, weak revenues and margins in the oil and gas segment and so on.
Of the total quarterly revenue, the Electric Power Infrastructure segment accounted for 64.7% and the Oil and Gas Infrastructure segment represented 35.3%.
Segment-wise, revenues from Electric Power Infrastructure declined about 5.2% year over year to $1,159.1 million. Oil and Gas Infrastructure segmental revenues fell 2.6% to $633.3 million.
In second-quarter 2016, operating income came in at $35.5 million, drastically down from $68.9 million recorded in the prior-year quarter.
At the quarter end, Quanta Services’ consolidated total backlog was $9,955.7 million, up from $9,150.9 million at the end of Jun 30, 2015.
Liquidity
Quanta Services exited the quarter with cash and cash equivalents of $162.3 million, up from $128.8 million as of Dec 31, 2015. On Jun 30, 2016, the company’s long-term debt and notes payable stood at $401.1 million, down from $475.3 million as of Dec 31, 2015.
Shares Repurchases
During the quarter, Quanta Services completed the company's previously announced accelerated stock repurchase arrangement and bought back around $750 million worth of shares.
Notable Developments
During the quarter, Quanta Services secured a construction contract on a new 100-mile double-circuit 345 kilovolt transmission line for a Midwest utility in its service territory. The project is expected to be completed in the third quarter of 2018.
Also, Quanta Services was selected by a California-based utility for a large electric power transmission and distribution project, subsequent to the quarter end.Quanta's scope of work in the order includes the engineering, procurement and construction of the project. The project is scheduled to be completed in late 2019.
2016 Outlook
Concurrent with the earnings release, Quanta Services updated its guidance for the full year. The company expects adjusted earnings per share from continuing operations in the range of $1.52--$1.67 (down from the previously guided range of $1.61--$1.81). Quanta Services expects revenues for the year in the band of $7.75 billion to $8 billion.
QUANTA SERVICES Price and EPS Surprise
QUANTA SERVICES Price and EPS Surprise | QUANTA SERVICES Quote
Our Take
Quanta Services witnessed a dismal quarter, largely because of adverse factors like weather and regulatory issues. One of the biggest challenges for the company is obtaining the sighting and permission of energy infrastructure projects, including major electric transmission programs, and this is weighing on its profitability.
In addition to this, the current volatility in the oil and gas market, along with reduced consumer spending, has been affecting the company’s projects and orders. The Canadian economy has been severely affected by the collapse in oil prices, which in turn proved to be a significant headwind for the company’s growth momentum.
Despite these negatives, solid execution of core transmission and distribution operations is acting as a positive. Moreover, its lucrative project wins and strong backlog levels signal bright days ahead. Its top line should benefit from the expected mobilization of a number of large diameter pipeline projects. The company is also seeing increased activity in the large electric transmission project market, which bodes well for potential contract wins for the company.
Quanta Services current carries a Zacks Rank #4 (Sell). Better-ranked stocks in the same space include AECOM (ACM - Free Report) , Willdan Group, Inc. (WLDN - Free Report) and Jacobs Engineering Group Inc. , each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>