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MasTec (MTZ) Stock Down Even as Q3 Earnings Beat Estimates

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MasTec, Inc. (MTZ - Free Report) reported third-quarter 2020 results, wherein earnings beat the Zacks Consensus Estimate and increased on a year-over-year basis. However, revenues missed the consensus mark and declined year over year owing to the coronavirus pandemic. Following the results, shares of the company fell 5.1% during after-market trading hours on Oct 29.

Nonetheless, its adjusted earnings exceeded management’s expectations on the back of solid segmental performances (barring Oil and Gas and Communications). Also, the bottom line beat the consensus mark for the ninth straight quarter.

Inside the Headlines

During the third quarter, MasTec reported adjusted earnings per share of $1.83, which not only surpassed the Zacks Consensus Estimate of $1.68 by 8.9% but also outpaced its expectation of $1.67 by 9.6%. Moreover, the metric grew 2.8% on a year-over-year basis from $1.78.

Revenues of $1,698.3 million missed the consensus mark of $1,910 million by 11.1%. It also declined 15.8% on a year-over-year basis.

At the end of the reported quarter, the company had an 18-month backlog of $7.7 billion, up 2.4% from the last-year level.

MasTec, Inc. Price, Consensus and EPS Surprise


MasTec, Inc. Price, Consensus and EPS Surprise

MasTec, Inc. price-consensus-eps-surprise-chart | MasTec, Inc. Quote

Segment Update

Revenues from Communications fell 5% year over year to $645.4 million. Adjusted EBITDA margin also rose 390 basis points (bps) to 12.3%.

Electrical Transmission segment revenues came in at $128.5 million, up 24.8% from the year-ago quarter. However, adjusted EBITDA margin came in at 7.1%, down 50 bps from the prior-year quarter.

Clean Energy and Infrastructure’s (primarily known as Power Generation and Industrial) revenues surged a notable 79.2% year over year to $468.9 million. Adjusted EBITDA margin came in at 7.3%, increasing 640 bps year over year.

Revenues from the Oil and Gas segment plunged 52.4% year over year to $462.5 million. Nonetheless, adjusted EBITDA margin improved an impressive 1280 bps to 34.7%.

Operational Update

General and administrative expenses, as a percentage of revenues, increased 50 bps from the prior-year quarter to 4.3%. The company reported adjusted EBITDA of $264.8 million, up 5% from the prior-year period. Adjusted EBITDA margin also contracted 310 bps to 15.6%.

Financial Details

As of Sep 30, 2020, MasTec had cash and cash equivalents of $238.2 million compared with $71.4 million at 2019-end. For the nine months ended Sep 30, 2020, the company provided $712.5 million of cash from operating activities, compared with $441.4 million a year ago.

2020 Guidance

MasTec noted that most of its construction services are deemed essential under the state and local pandemic mitigation orders. It anticipates the business to keep facing the impact of the COVID-19 outbreak in the remaining quarters of 2020. The company may witness lost productivity from governmental permitting delays, reduced crew productivity due to social distancing, lower levels of overhead cost absorption and a delay or shutdown of projects.

Based on these headwinds, MasTec expects to generate revenues worth $6.4-$6.6 billion in the ongoing year, down from $7 billion projected earlier. This reduced projection mainly stemmed from the effects of COVID-19 across its end markets. Moreover, the company has been witnessing regulatory deferments of two large Oil & Gas projects, which started later than expected.

Adjusted EBITDA is expected to be $800-$811 million compared with $800 million expected earlier. This, however, indicates a decline from the adjusted EBITDA of $843.2 million reported in 2019. Adjusted EBITDA margin is likely to be 12.3% to 12.5% compared with 11.4% predicted earlier. In 2019, the company recorded adjusted EBITDA margin of 11.7%. Adjusted earnings are anticipated in the range of $5 to $5.09 per share (compared with $4.93 envisioned earlier). Adjusted earnings in 2019 were $5.46 per share.

Fourth-Quarter View

MasTec expects fourth-quarter revenues in the range of $1.7-$1.9 billion. Adjusted EBITDA is estimated in the band of $252-$263 million, with margin projection in the range of 13.7% to 14.7%. Adjusted EBITDA in the year-ago period was $210.2 million, with a margin of 12.3%. Adjusted earnings per share for the fourth quarter are expected in the range of $1.64 to $1.73, suggesting growth from the year-ago $1.40.

Zacks Rank

MasTec, which shares space with EMCOR Group, Inc. (EME - Free Report) , Dycom Industries Inc. (DY - Free Report) and Great Lakes Dredge & Dock Corporation (GLDD - Free Report) in the Zacks Building Products - Heavy Construction industry, currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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