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Mastec (MTZ) Looks a Solid Bet: Add to Your Portfolio Now
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Shares of MasTec, Inc. (MTZ - Free Report) are riding high on positive earnings surprise, upbeat outlook, and increased large Oil & Gas project activity. Ever since the company reported quarterly numbers on Nov 2, its shares have surged 10.8%, outperforming the industry’s growth of 6.8%. Further, this leading infrastructure construction company has a long-term earnings growth rate of 14%, making us confident of its inherent strength. Let’s delve deeper and find out what’s fueling this stock.
Growth Drivers
MasTec delivered third-quarter 2017 adjusted earnings per share of 82 cents, up 1.2% year over year as sales surged 23% year over year to a record $1.96 billion in the quarter. The improvement came on the back of the Oil and Gas segment performance. Driven by significant project wins subsequent to the third quarter, MasTec expects record backlogs in the year-end, exceeding $6 billion. In the Oil & Gas segment, the pipeline business is being driven by strong demand in the United States.
For 2017, revenues are projected at record levels of $6.3 billion, 24% higher than the previous year. Adjusted earnings per share are projected at $2.80, up 47% compared with $1.90 in fiscal 2016.
We believe, MasTec’s wireless business has significant potential going forward, given that substantial investments are anticipated in wireless infrastructure related to the densification associated with 5G deployment. Every major carrier has publicly disclosed plans and initiatives for 5G. Further, AT&T Inc. (T - Free Report) was awarded FirstNet, a nationwide public safety wireless network. Currently, 28 states have opted into FirstNet. Both 5G and FirstNet will be catalysts for 2018 revenues and will provide a significant boost in 2019.
In wireline markets, fiber expansion continues to drive growth. Moreover, there has been a significant rise in margins as a result of the operational improvements carried out in the Power Generation and Industrial segment. The top line is also likely to grow in the segment as project pipeline and bidding activity continues to be strong. For the Electrical Transmission business, prospects of large industry awards are likely to improve results in 2018 and beyond.
Other factors that make MasTec a favorable investment include,
Positive Earnings Surprise History: MasTec has an impressive earnings surprise history, outpacing the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 28.05%.
Estimates Moving North: The company’s estimates for 2017 and 2018, have moved up in the past 60 days, reflecting the positive outlook of analysts on the stock. For 2017, the Zacks Consensus Estimate has climbed 2% to $2.80 per share and for 2018, the same has moved north 3% to $3.07.
Solid Zacks Rank, Score Combination: MasTec carries a Zacks Rank #2 (Buy). it has a VGM score of A. Here V stands for Value, G for Growth and M for Momentum. The company’s score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 make solid investment choices.
Return on Equity: MasTec’s trailing 12-month return on equity (ROE) supports growth potential. Its ROE in the trailing 12 months is 20.7%, much higher than the industry’s average of 6.3%. This reflects the company’s efficient usage of shareholders’ funds.
Stock Seems Undervalued: MasTec has a trailing 12-month price earnings (P/E) ratio of 15.4 while the industry’s average trailing 12-month P/E ratio is 29.7. Based on this ratio, the stock seems undervalued.
EMCOR delivered an average positive earnings surprise of 16.96% in the trailing four quarters. The stock has gained 13.3% in the previous year, ahead of the industry’s growth of 4.1%.
Sterling Construction pulled off an average earnings surprise of 65.19% in the last four quarters. The stock has surged 104.6% in the prior year, way ahead of the industry’s rise of 4.1%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Mastec (MTZ) Looks a Solid Bet: Add to Your Portfolio Now
Shares of MasTec, Inc. (MTZ - Free Report) are riding high on positive earnings surprise, upbeat outlook, and increased large Oil & Gas project activity. Ever since the company reported quarterly numbers on Nov 2, its shares have surged 10.8%, outperforming the industry’s growth of 6.8%. Further, this leading infrastructure construction company has a long-term earnings growth rate of 14%, making us confident of its inherent strength. Let’s delve deeper and find out what’s fueling this stock.
Growth Drivers
MasTec delivered third-quarter 2017 adjusted earnings per share of 82 cents, up 1.2% year over year as sales surged 23% year over year to a record $1.96 billion in the quarter. The improvement came on the back of the Oil and Gas segment performance. Driven by significant project wins subsequent to the third quarter, MasTec expects record backlogs in the year-end, exceeding $6 billion. In the Oil & Gas segment, the pipeline business is being driven by strong demand in the United States.
For 2017, revenues are projected at record levels of $6.3 billion, 24% higher than the previous year. Adjusted earnings per share are projected at $2.80, up 47% compared with $1.90 in fiscal 2016.
We believe, MasTec’s wireless business has significant potential going forward, given that substantial investments are anticipated in wireless infrastructure related to the densification associated with 5G deployment. Every major carrier has publicly disclosed plans and initiatives for 5G. Further, AT&T Inc. (T - Free Report) was awarded FirstNet, a nationwide public safety wireless network. Currently, 28 states have opted into FirstNet. Both 5G and FirstNet will be catalysts for 2018 revenues and will provide a significant boost in 2019.
In wireline markets, fiber expansion continues to drive growth. Moreover, there has been a significant rise in margins as a result of the operational improvements carried out in the Power Generation and Industrial segment. The top line is also likely to grow in the segment as project pipeline and bidding activity continues to be strong. For the Electrical Transmission business, prospects of large industry awards are likely to improve results in 2018 and beyond.
Other factors that make MasTec a favorable investment include,
Positive Earnings Surprise History: MasTec has an impressive earnings surprise history, outpacing the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 28.05%.
Estimates Moving North: The company’s estimates for 2017 and 2018, have moved up in the past 60 days, reflecting the positive outlook of analysts on the stock. For 2017, the Zacks Consensus Estimate has climbed 2% to $2.80 per share and for 2018, the same has moved north 3% to $3.07.
Solid Zacks Rank, Score Combination: MasTec carries a Zacks Rank #2 (Buy). it has a VGM score of A. Here V stands for Value, G for Growth and M for Momentum. The company’s score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 make solid investment choices.
Return on Equity: MasTec’s trailing 12-month return on equity (ROE) supports growth potential. Its ROE in the trailing 12 months is 20.7%, much higher than the industry’s average of 6.3%. This reflects the company’s efficient usage of shareholders’ funds.
Stock Seems Undervalued: MasTec has a trailing 12-month price earnings (P/E) ratio of 15.4 while the industry’s average trailing 12-month P/E ratio is 29.7. Based on this ratio, the stock seems undervalued.
Other Stocks to Consider
Some other top-ranked stocks worth considering in the same industry include EMCOR Group, Inc. (EME - Free Report) and Sterling Construction Company, Inc. (STRL - Free Report) , both sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
EMCOR delivered an average positive earnings surprise of 16.96% in the trailing four quarters. The stock has gained 13.3% in the previous year, ahead of the industry’s growth of 4.1%.
Sterling Construction pulled off an average earnings surprise of 65.19% in the last four quarters. The stock has surged 104.6% in the prior year, way ahead of the industry’s rise of 4.1%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>