We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
MasTec (MTZ) Stock Sees 17.8% One-Month Gains Amid Inflation
Read MoreHide Full Article
MasTec, Inc. (MTZ - Free Report) is well positioned for growth in the near term given persistent customer demand for renewable power generation, power grid transmission and distribution, and civil infrastructure services. Also, the acquisition of Infrastructure and Energy Alternatives, Inc. (IEA) and significant shift in 2022 operations to non-Oil & Gas segments bode well.
Shares of this leading infrastructure construction company have gained 17.8% over a month, outperforming the Zacks Building Products - Heavy Construction industry’s 11.1% growth. In fact, over the past six months, MTZ stock has gained 10.7%, compared with 11.7% increase of the industry.
However, lower 2022 earnings expectation, supply-chain issues, higher costs and project delays remain concerns.
Let’s delve deeper into the major driving factors.
Focus on non-Oil and Gas Business: MTZ’s consistent focus on diversifying the business and enhancing the non-Oil and Gas segments is expected to drive earnings growth. Rising demand for carbon-neutral sources for power infrastructure bodes well for the company.
MasTec’s non-Oil and Gas segments’ revenues were up 38% year over year in third-quarter 2022. It represented 85% of quarterly revenues and 80% of operational EBITDA and significantly diversified both revenues and earnings mix. Its non-Oil and Gas segments achieved double-digit EBITDA margins, improving 250 basis points (bps) year over year and 370 bps sequentially.
Third-quarter 2022 revenue growth in non-Oil and Gas operations was driven by $300 million or 88% in Power Delivery segment, $200 million or 33% in Communications segment and $50 million or 9% in Clean Energy and Infrastructure segment. MTZ continues to expect strong revenue growth in these areas in the future, supported by solid backlog levels for all its non-Oil and Gas segments.
Solid Backlog Level: At September end, the company had an 18-month backlog of $11.2 billion, up 32% year over year and a $222 million increase sequentially. This backlog provides it with strong visibility into 2022 and 2023. MasTec anticipates realizing approximately 22% of the September-end backlog in 2022.
For the full year, it expects to generate significant revenue contributions from the non-Oil and Gas segments representing almost 90% of its annual $9.7 billion revenues estimate.
As of Sep 30, backlog at Clean Energy and Infrastructure segment increased 23.1% from a year ago to $1.93 billion. A persistent focus on carbon neutrality is expected to drive growth of this segment. For 2023, MasTec expects that this segment can approximate $5 billion in revenues with an improved annual adjusted EBITDA margin rate performance in the mid-to-high single-digit range.
In Communications segment, September-end backlog increased 12.4% from a year ago to $5.02 billion. For the Power Delivery segment backlog at the end of September increased 109.2% from a year ago to $2.76 billion.
IEA Buyout: In October 2022, MasTec completed the acquisition of Infrastructure and Energy Alternatives, Inc. (IEA), a leading utility-scale renewable energy infrastructure solutions provider in North America. MasTec believes IEA will generate revenues between $2.6 billion and $2.7 billion and adjusted EBITDA within $160-$170 million in 2023, exclusive of any post-transaction synergies.
MTZ anticipates annual cost savings of approximately $10 million, owing to the combination of reduced IEA public company reporting and other costs. It expects that IEA will generate $45-$50 million of adjusted net income in 2023.
Headwinds
Inflationary Pressures: MasTec has been experiencing the general impact of inflationary pressures and labor shortages on its business. It expects labor, fuel and materials costs to increase in the future and may continue to affect profitability and cash flows.
Also, inflationary pressures and related concerns, in light of government and central bank efforts to mitigate inflation, may also cause uncertainties and affect project activity. Such factors could also adversely impact the company’s profitability and cash flows.
Owing to the acquisition integration costs and inflationary pressures, MasTec now expects adjusted earnings to be $3.02 per share versus the earlier expectation of $3.09 per share. The estimated figure indicates a decrease from $5.58 per share reported in 2021.
Project Delays & Supply-Chain Disruptions: Although MasTec has enough visibility, the biggest risks to its guidance are around governmental permitting, crew social distancing mitigation and the impact they may have on project schedules, along with any potential project delays. Notably, the MVP pipeline continues to experience delays due to permitting and judicial actions.
3 Top-Ranked Construction Stocks Hogging the Limelight
Some better-ranked stocks, which warrant a look in the Construction sector, include:
EMCOR Group, Inc. (EME - Free Report) — carrying a Zacks Rank #2 (Buy)— is one of the leading providers of mechanical and electrical construction, industrial and energy infrastructure, as well as building services for a diverse range of businesses.
EME’s expected earnings growth rates for 2022 and 2023 are 10.2% and 17%, respectively. The Zacks Consensus Estimate for current-year and the next-year earnings have improved 0.6% and 13%, respectively, over the past 30 days.
Sterling Infrastructure, Inc. (STRL - Free Report) — also carrying a Zacks Rank #2 — has been benefiting from broad-based growth across the e-infrastructure, building and transportation solutions segments.
STRL’s expected earnings growth rates for 2022 and 2023 are 47.4% and 6.3%, respectively. The Zacks Consensus Estimate for current-year and next-year earnings have improved 4.3% and 3.4%, respectively, over the past 30 days.
Altair Engineering Inc. (ALTR - Free Report) — also carrying a Zacks Rank #2 — provides software and cloud solutions in simulation, high-performance computing, data analytics and AI worldwide.
ALTR’s expected earnings growth rate for 2022 and 2023 is pegged at 10.6% and 21.5%, respectively.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
MasTec (MTZ) Stock Sees 17.8% One-Month Gains Amid Inflation
MasTec, Inc. (MTZ - Free Report) is well positioned for growth in the near term given persistent customer demand for renewable power generation, power grid transmission and distribution, and civil infrastructure services. Also, the acquisition of Infrastructure and Energy Alternatives, Inc. (IEA) and significant shift in 2022 operations to non-Oil & Gas segments bode well.
Shares of this leading infrastructure construction company have gained 17.8% over a month, outperforming the Zacks Building Products - Heavy Construction industry’s 11.1% growth. In fact, over the past six months, MTZ stock has gained 10.7%, compared with 11.7% increase of the industry.
However, lower 2022 earnings expectation, supply-chain issues, higher costs and project delays remain concerns.
MasTec currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Let’s delve deeper into the major driving factors.
Focus on non-Oil and Gas Business: MTZ’s consistent focus on diversifying the business and enhancing the non-Oil and Gas segments is expected to drive earnings growth. Rising demand for carbon-neutral sources for power infrastructure bodes well for the company.
MasTec’s non-Oil and Gas segments’ revenues were up 38% year over year in third-quarter 2022. It represented 85% of quarterly revenues and 80% of operational EBITDA and significantly diversified both revenues and earnings mix. Its non-Oil and Gas segments achieved double-digit EBITDA margins, improving 250 basis points (bps) year over year and 370 bps sequentially.
Third-quarter 2022 revenue growth in non-Oil and Gas operations was driven by $300 million or 88% in Power Delivery segment, $200 million or 33% in Communications segment and $50 million or 9% in Clean Energy and Infrastructure segment. MTZ continues to expect strong revenue growth in these areas in the future, supported by solid backlog levels for all its non-Oil and Gas segments.
Solid Backlog Level: At September end, the company had an 18-month backlog of $11.2 billion, up 32% year over year and a $222 million increase sequentially. This backlog provides it with strong visibility into 2022 and 2023. MasTec anticipates realizing approximately 22% of the September-end backlog in 2022.
For the full year, it expects to generate significant revenue contributions from the non-Oil and Gas segments representing almost 90% of its annual $9.7 billion revenues estimate.
As of Sep 30, backlog at Clean Energy and Infrastructure segment increased 23.1% from a year ago to $1.93 billion. A persistent focus on carbon neutrality is expected to drive growth of this segment. For 2023, MasTec expects that this segment can approximate $5 billion in revenues with an improved annual adjusted EBITDA margin rate performance in the mid-to-high single-digit range.
In Communications segment, September-end backlog increased 12.4% from a year ago to $5.02 billion. For the Power Delivery segment backlog at the end of September increased 109.2% from a year ago to $2.76 billion.
IEA Buyout: In October 2022, MasTec completed the acquisition of Infrastructure and Energy Alternatives, Inc. (IEA), a leading utility-scale renewable energy infrastructure solutions provider in North America. MasTec believes IEA will generate revenues between $2.6 billion and $2.7 billion and adjusted EBITDA within $160-$170 million in 2023, exclusive of any post-transaction synergies.
MTZ anticipates annual cost savings of approximately $10 million, owing to the combination of reduced IEA public company reporting and other costs. It expects that IEA will generate $45-$50 million of adjusted net income in 2023.
Headwinds
Inflationary Pressures: MasTec has been experiencing the general impact of inflationary pressures and labor shortages on its business. It expects labor, fuel and materials costs to increase in the future and may continue to affect profitability and cash flows.
Also, inflationary pressures and related concerns, in light of government and central bank efforts to mitigate inflation, may also cause uncertainties and affect project activity. Such factors could also adversely impact the company’s profitability and cash flows.
Owing to the acquisition integration costs and inflationary pressures, MasTec now expects adjusted earnings to be $3.02 per share versus the earlier expectation of $3.09 per share. The estimated figure indicates a decrease from $5.58 per share reported in 2021.
Project Delays & Supply-Chain Disruptions: Although MasTec has enough visibility, the biggest risks to its guidance are around governmental permitting, crew social distancing mitigation and the impact they may have on project schedules, along with any potential project delays. Notably, the MVP pipeline continues to experience delays due to permitting and judicial actions.
3 Top-Ranked Construction Stocks Hogging the Limelight
Some better-ranked stocks, which warrant a look in the Construction sector, include:
EMCOR Group, Inc. (EME - Free Report) — carrying a Zacks Rank #2 (Buy)— is one of the leading providers of mechanical and electrical construction, industrial and energy infrastructure, as well as building services for a diverse range of businesses.
EME’s expected earnings growth rates for 2022 and 2023 are 10.2% and 17%, respectively. The Zacks Consensus Estimate for current-year and the next-year earnings have improved 0.6% and 13%, respectively, over the past 30 days.
Sterling Infrastructure, Inc. (STRL - Free Report) — also carrying a Zacks Rank #2 — has been benefiting from broad-based growth across the e-infrastructure, building and transportation solutions segments.
STRL’s expected earnings growth rates for 2022 and 2023 are 47.4% and 6.3%, respectively. The Zacks Consensus Estimate for current-year and next-year earnings have improved 4.3% and 3.4%, respectively, over the past 30 days.
Altair Engineering Inc. (ALTR - Free Report) — also carrying a Zacks Rank #2 — provides software and cloud solutions in simulation, high-performance computing, data analytics and AI worldwide.
ALTR’s expected earnings growth rate for 2022 and 2023 is pegged at 10.6% and 21.5%, respectively.