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Quanta Services' (PWR) Q3 Earnings In Line, View Slashed
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Quanta Services Inc. (PWR - Free Report) reported third-quarter 2016 adjusted earnings (including stock based compensation expense) of 51 cents per share, which came in line with the Zacks Consensus Estimate.
The company’s non-GAAP adjusted earnings from continuing operations came in at 55 cents, up 83.3% from the prior-year quarter tally of 30 cents. The bottom-line growth is attributable to modest top-line performance and sound execution of projects at the base electric power business.
Inside the Headlines
Total revenue in the quarter came in at $2,042.2 million, up 5.3% on a year-over-year basis. However, the figure missed the Zacks Consensus Estimate of $2,075 million. The top-line growth came on the back of large pipeline projects that moved into construction during the reported quarter. Record growth of revenues at Oil and Gas Infrastructure segment acted as the primary catalyst.
Of the total quarterly revenue, the Electric Power Infrastructure segment accounted for 59.9% and the Oil and Gas Infrastructure segment represented 40.1%.
Segment wise, revenues from Electric Power Infrastructure rose about 3.3% year over year to $1,222.4 million. Additionally, Oil and Gas Infrastructure segmental revenues were up 8.4% to $819.8 million.
In third-quarter 2016, operating income came in at $130.2 million, up from $80.9 million recorded in the prior-year quarter.
At quarter end, Quanta Services’ consolidated total backlog was $9,842.9 million, up from $9,647.7 million at the end of Sep 30, 2015.
Liquidity
Quanta Services exited the quarter with cash and cash equivalents of $117.4 million, down from $128.8 million as of Dec 31, 2015. On Sep 30, 2016, the company’s long-term debt and notes payable was $482.4 million, down from $475.4 million as of Dec 31, 2015.
Notable Developments
During the quarter – Spring Ridge Constructors, LLC – a joint venture that includes Quanta Services’ subsidiary Price Gregory International, was selected to construct the 600-mile natural gas pipeline – Atlantic Coast Pipeline. This pipeline is expected to connect Harris County, W. VA to Robeson County, N.C. Construction of the project is likely to commence in late 2017 and end by the second half of 2019. This project is not reflected in the backlog as construction will begin only after meeting regulatory approvals.
Concurrent with the earnings release, Quanta Services revised its full-year 2016 earnings and revenues guidance downward. The company now projects adjusted earnings per share from continuing operations in the range of $1.51–$1.56 (down from the previously guided range of $1.52--$1.67). The company expects revenues for the year in the band of $7.65–$7.75 billion, down from the earlier guided range of $7.75–$8 billion.
Factors including endowment contribution, incremental costs associated with an Alaskan power plant project and higher tax rate are largely attributable to the downcast outlook. Also, unfavorable timing of revenues and corresponding income contributions of certain projects have been adding to the company’s woes, resulting in the lackluster guidance.
Our Take
Though Quanta Services’ third-quarter earnings and revenues failed to beat estimates, the company’s sturdy top-line performance signals a meaningful rebound. The Oil & Gas Infrastructure Services revenues have bounced back to growth, after quite a few quarters of dismal performances. A gradual shift from coal to gas for power generation from commercial and residential customers has been fortifying natural gas pipeline projects, thus boosting growth.
The company focuses on the timely delivery of projects, leveraging on its core business areas to expand in complementary service lines and venturing into new service lines. Its decentralized and entrepreneurial business model has aided it in combating some of the most pressing macroeconomic challenges, driving growth in recent times. In addition, solid rebound in its end markets, on the back of key growth drivers, like an aging grid, shifting generation mix and implementation of clean energy initiatives, bode well for long-term growth.
Applied Industrial Technologies is one of North America's leading distributors of bearings, linear technologies, power transmission components, rubber products and specialty maintenance items to the MRO and OEM markets. The company managed to beat estimates thrice over the trailing four quarters and has a positive earnings surprise of 4.9%.
KBR is a global engineering, construction and services firm, supporting market segments of global hydrocarbons and international government services. The company has beat earnings twice over the trailing four quarters and has a positive average beat of 3.9%.
Chart Industries is a leading independent global manufacturer of highly engineered equipment used in the production, storage and end use of hydrocarbon and industrial gases. The company had posted a whopping earnings beat of 453.9% in the last reported quarter.
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Quanta Services' (PWR) Q3 Earnings In Line, View Slashed
Quanta Services Inc. (PWR - Free Report) reported third-quarter 2016 adjusted earnings (including stock based compensation expense) of 51 cents per share, which came in line with the Zacks Consensus Estimate.
The company’s non-GAAP adjusted earnings from continuing operations came in at 55 cents, up 83.3% from the prior-year quarter tally of 30 cents. The bottom-line growth is attributable to modest top-line performance and sound execution of projects at the base electric power business.
Inside the Headlines
Total revenue in the quarter came in at $2,042.2 million, up 5.3% on a year-over-year basis. However, the figure missed the Zacks Consensus Estimate of $2,075 million. The top-line growth came on the back of large pipeline projects that moved into construction during the reported quarter. Record growth of revenues at Oil and Gas Infrastructure segment acted as the primary catalyst.
Of the total quarterly revenue, the Electric Power Infrastructure segment accounted for 59.9% and the Oil and Gas Infrastructure segment represented 40.1%.
Segment wise, revenues from Electric Power Infrastructure rose about 3.3% year over year to $1,222.4 million. Additionally, Oil and Gas Infrastructure segmental revenues were up 8.4% to $819.8 million.
In third-quarter 2016, operating income came in at $130.2 million, up from $80.9 million recorded in the prior-year quarter.
At quarter end, Quanta Services’ consolidated total backlog was $9,842.9 million, up from $9,647.7 million at the end of Sep 30, 2015.
Liquidity
Quanta Services exited the quarter with cash and cash equivalents of $117.4 million, down from $128.8 million as of Dec 31, 2015. On Sep 30, 2016, the company’s long-term debt and notes payable was $482.4 million, down from $475.4 million as of Dec 31, 2015.
Notable Developments
During the quarter – Spring Ridge Constructors, LLC – a joint venture that includes Quanta Services’ subsidiary Price Gregory International, was selected to construct the 600-mile natural gas pipeline – Atlantic Coast Pipeline. This pipeline is expected to connect Harris County, W. VA to Robeson County, N.C. Construction of the project is likely to commence in late 2017 and end by the second half of 2019. This project is not reflected in the backlog as construction will begin only after meeting regulatory approvals.
QUANTA SERVICES Price, Consensus and EPS Surprise
QUANTA SERVICES Price, Consensus and EPS Surprise | QUANTA SERVICES Quote
Guidance Cut
Concurrent with the earnings release, Quanta Services revised its full-year 2016 earnings and revenues guidance downward. The company now projects adjusted earnings per share from continuing operations in the range of $1.51–$1.56 (down from the previously guided range of $1.52--$1.67). The company expects revenues for the year in the band of $7.65–$7.75 billion, down from the earlier guided range of $7.75–$8 billion.
Factors including endowment contribution, incremental costs associated with an Alaskan power plant project and higher tax rate are largely attributable to the downcast outlook. Also, unfavorable timing of revenues and corresponding income contributions of certain projects have been adding to the company’s woes, resulting in the lackluster guidance.
Our Take
Though Quanta Services’ third-quarter earnings and revenues failed to beat estimates, the company’s sturdy top-line performance signals a meaningful rebound. The Oil & Gas Infrastructure Services revenues have bounced back to growth, after quite a few quarters of dismal performances. A gradual shift from coal to gas for power generation from commercial and residential customers has been fortifying natural gas pipeline projects, thus boosting growth.
The company focuses on the timely delivery of projects, leveraging on its core business areas to expand in complementary service lines and venturing into new service lines. Its decentralized and entrepreneurial business model has aided it in combating some of the most pressing macroeconomic challenges, driving growth in recent times. In addition, solid rebound in its end markets, on the back of key growth drivers, like an aging grid, shifting generation mix and implementation of clean energy initiatives, bode well for long-term growth.
Quanta Services currently holds a Zacks Rank #2 (Buy). Other favorably placed stocks in the industry include Applied Industrial Technologies, Inc. (AIT - Free Report) , KBR, Inc. (KBR - Free Report) and Chart Industries Inc. (GTLS - Free Report) , all of which carry the same Zacks Rank as Quanta Services. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Applied Industrial Technologies is one of North America's leading distributors of bearings, linear technologies, power transmission components, rubber products and specialty maintenance items to the MRO and OEM markets. The company managed to beat estimates thrice over the trailing four quarters and has a positive earnings surprise of 4.9%.
KBR is a global engineering, construction and services firm, supporting market segments of global hydrocarbons and international government services. The company has beat earnings twice over the trailing four quarters and has a positive average beat of 3.9%.
Chart Industries is a leading independent global manufacturer of highly engineered equipment used in the production, storage and end use of hydrocarbon and industrial gases. The company had posted a whopping earnings beat of 453.9% in the last reported quarter.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>