Earnings Preview: Quanta Services

Quanta Services Inc. ( PWR - Analyst Report ) is slated to release first-quarter 2011 results on Wednesday, May 4. The current Zacks Consensus Estimate for first-quarter earnings per share (EPS) is 3 cents, representing an annualized decline of 77.35%.

Quanta Serviceshad reported in line with the Zacks Consensus Estimate over the last three quarters and outperformed in the first quarter of 2010 with a positive surprise of 62.50%.

Fourth Quarter 2010 Highlights

Quanta Services Inc. reported its fourth-quarter 2010 adjusted earnings per share of 23 cents, beating the Zacks Consensus Estimate of 16 cents but below the prior-year earnings per share of 31 cents.

Adjusted earnings per share were 92 cents for 2010, outpacing the Zacks Consensus Estimate of 74 cents and prior-year earnings of 90 cents.

Total revenue for the quarter was $1.11 billion compared with $985.4 million in the prior-year quarter. Consolidated backlog at the end of the quarter was $2.87 billion compared with $6.32 billion. Revenue for the quarter includes the impact of Valard Construction acquisition, completed on October 25, 2010.

For full year, total revenue was $3.93 billion compared with $3.32 billion in 2009. In 2010, the company’s total backlog for electric power and telecommunications segments surged appreciably in comparison with 2009.

Agreement of Estimate Revisions

In the last 7 days, no earnings estimate was increased for fiscal 2011 and fiscal 2012 out of 18 and 17 total estimates, respectively. Also, no earnings estimate was changed for the first quarter of 2011.

Magnitude of Estimate Revisions

Earnings estimates for 2011 and 2012 have been stable in the last 30 days.

The estimate for the first quarter has also been stable at 3 cents per share, reflecting a decline of 77.35% over the year-ago comparable quarter.

Our Take

Quanta Services has been witnessing an increased customer spending as they have started to invest in infrastructure with the improving economic environment, showing that the company has overcome the worst phase of the recession. The company expects to benefit significantly from the ongoing bidding processes in its Natural Gas and Pipeline segment, leading to a continuous increase in the segment’s backlog.

However, the industry in which Quanta operates, is served by numerous small owner-operated private companies, some public companies and several large regional companies. In addition, relatively few barriers prevent entry into some of the industries. As a result, any organization that has adequate financial resources and access to technical expertise may become one of its competitors. Competition in the industry depends on a number of factors, including price. Major competitors of Quanta Services are EMCOR Group Inc. ( EME - Snapshot Report ) , Integrated Electrical Services Inc. ( IESC ) and MYR Group Inc. ( MYRG - Snapshot Report ) .

Quanta Services Inc. is a leading national provider of specialty contracting services, and is one of the largest contractors serving the transmission and distribution sector of the North American electric utility industry. Effective during the quarter ended Sep30, 2009, Quanta began reporting its results under four reportable segments: (1)Electric Power Infrastructure Services, (2)Natural Gas and Pipeline Infrastructure Services, (3)Telecommunications Infrastructure Services and (4)Fiber Optic Licensing.

Quanta Services holds a Zacks #2 Rank (Buy recommendation) over the next one-to-three months.