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Quanta Services (PWR) Q2 Earnings: What's in the Cards?

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Quanta Services, Inc. (PWR - Free Report) is slated to report second-quarter 2017 results before the opening bell on Aug 3.

Quanta Services has had a dismal earnings surprise history, with three misses and one in-line earnings over the trailing four quarters, for an average negative surprise of 17.3%. Last quarter, the company’s earnings missed the Zacks Consensus Estimate by 10.5%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Quanta Services has been deriving strong benefits from its diligent three-pronged growth strategy. The strategy 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 as well.

Quanta Services’ thriving engineering and project management services are expected to boost its revenues for the soon-to-be-reported quarter. Of late, the company has been witnessing a 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.

Moreover, the company is currently pursuing several high-voltage electric transmission award opportunities, amid substantial bidding activity, in Australia, Canada and the U.S. Quanta Services’ optimism stems from healthy backlog levels which are anticipated to benefit the results in the to-be-reported quarter. We believe that these positive industry trends will act as major growth catalysts for the quarter to be reported.

Quanta Services, Inc. Price, Consensus and EPS Surprise

This apart, robust pipeline projects in the oil and gas sector, supported by active bidding and negotiating environment, can also act as huge profit churners for the top line in the second quarter. In addition, Quanta Services’ previously completed acquisitions are likely to contribute significantly to the Electric Power Infrastructure Services segment’s top line.

However, Quanta Services has been grappling with adverse weather conditions in recent times. In the last reported quarter, the company’s revenue growth was marred by regulatory delays on some large mainline pipe projects and fluctuations in timing of large projects. Also, the company believes that obtaining sighting and permission for energy infrastructure projects may continue to dent profitability.

Going forward, the company expects fluctuations in backlog due to its faster book-and-burn nature and the timing of larger pipeline project awards. Moreover, there is the risk of oil and gas customers delaying commencement of work, which could impact margins in the quarter to be reported.

Further, the initial optimism surrounding Donald Trump's infrastructure plan seems to have waned, as worries grow about the feasibility of the plan. The plan to improve America's infrastructure could have provided a welcome boost to Quanta Services’ operations and profitability.

Earnings Whispers

Our proven model does not conclusively show that Quanta Services will likely beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is currently pegged at -6.00%. This is because the Most Accurate estimate of 47 cents is lower than the Zacks Consensus Estimate of 50 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Quanta Services’ Zacks Rank #2 increases the predictive power of ESP, but its negative Earnings ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Sempra Energy (SRE - Free Report) has an Earnings ESP of +11.25% and a Zacks Rank #2. The company is expected to release earnings results on Aug 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

Galapagos NV (GLPG - Free Report) has an Earnings ESP of +33.33% and a Zacks Rank #3. The company is anticipated to release earnings on Aug 4.

Calumet Specialty Products Partners, L.P. (CLMT - Free Report) has an Earnings ESP of +26.09% and a Zacks Rank #3. The company is likely to release earnings on Aug 4.

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