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MasTec (MTZ) Down 43.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for MasTec (MTZ - Free Report) . Shares have lost about 43.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is MasTec due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

MasTec Q4 Earnings Top, Revenues Lag, 2020 View Strong

MasTec, Inc. reported better-than-expected earnings in fourth-quarter 2019 on the back of solid Power Generation & Industrial segment. The segment’s revenues have increased a notable $700 million since 2017.

MasTec’s adjusted earnings per share of $1.30 surpassed the Zacks Consensus Estimate of $1.26 by 3.2% and exceeded the company’s expectation by 4%. Also, the metric grew 21.5% on a year-over-year basis.

However, revenues of $1.71 billion missed the consensus mark of $1.75 billion by 2% and declined 10.5% year over year. Notably, the said figure was in line with MasTec’s expectation. On third-quarter 2019 earnings call, the company noted that fourth-quarter and 2019 revenues will reflect the absence of a large project in the Oil & Gas business.

At the end of 2019, the company reported 18-month backlog of $8 billion, up 3.9% from $7.7 billion recorded last year.

Segment Update

Revenues from Communications grew 3.8% year over year to $673.9 million. Adjusted EBITDA margin, however, contracted 120 basis points (bps) to 8%.

Electrical Transmission segment’s revenues came in at $115.6 million, up 15.9% from the year-ago quarter. Adjusted EBITDA margin came in at 8%, up 240 bps from the year-ago period.

Power Generation and Industrial’s revenues surged a notable 50.2% year over year to $333 million. Adjusted EBITDA margin also rose 40 bps from the prior-year quarter to 7.7%.

Revenues from the Oil and Gas segment fell 38.1% from a year ago to $586.7 million. Nonetheless, adjusted EBITDA margin improved an impressive 820 bps to 23%.

Operational Update

General and administrative expenses increased 4.2% from the prior-year quarter to $78.9 million. The company reported adjusted EBITDA of $210.2 million, up 7.4% from the prior-year period. Adjusted EBITDA margin also surged 210 bps to 12.3%.

Financial Details

As of Dec 31, 2019, MasTec had cash and cash equivalents of $2.174 billion compared with $2.169 million at 2018-end. The company provided $550.3 million of cash from operating activities in 2019 compared with $530 million in 2018. Free cash flow in 2019 was $458.8 million.

2019 Highlights

In 2019, adjusted earnings were $5.21 per share, marking a 38.2% improvement from $3.77 registered in 2018. Also, the said metric surpassed the consensus mark by 0.8%. Revenues totaled $7.2 billion, reflecting 4.3% increase from a year ago. Adjusted EBITDA margin of 11.7% increased 130 bps year over year.

2020 Guidance

Backed by strong results in fourth-quarter 2019, solid backlog position, great visibility, healthy demand across segments and favorable market conditions, MasTec provided strong 2020 guidance. Also, it remains confident about 2021 and beyond, backed by end-market strength.

Revenues are expected to be $8 billion in 2020. The consensus mark for the same stands at $7.94 billion.

Adjusted EBITDA is projected to be $900 million, indicating growth from $843.2 million reported in 2019. Moreover, adjusted EBITDA margin is expected to be 11.3%. Adjusted earnings (excluding intangible asset amortization expense) are anticipated to be $5.63 per share, suggesting an increase from $5.44 in 2019.

First-Quarter 2020 View

MasTec expects revenues for first-quarter 2020 to be $1.3 billion, indicating a decline from $1.52 billion reported a year ago. Adjusted EBITDA is expected to be $108 million, with margin forecast of 8.3%. This implies fall from the year-ago respective figures of $140.1 million and 9.2%. Adjusted earnings per share (excluding intangible asset amortization expense) are anticipated to be 48 cents, indicating a decline of 22.6% from 62 cents reported in the comparable prior-year period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -35.59% due to these changes.

VGM Scores

Currently, MasTec has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MasTec has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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