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MasTec (MTZ) Tops Q2 Earnings on Record Oil & Gas Projects

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MasTec, Inc. (MTZ - Free Report) reported record second-quarter 2017 adjusted earnings per share of 99 cents, comfortably beating the Zacks Consensus Estimate of 62 cents by a wide margin of 60%. The better-than-expected performance was particularly led by record levels of Oil & Gas project activity.

Including one-time items, MasTec reported earnings of 99 cents per share compared to 30 cents reported in the prior-year quarter. The prior-year quarter included restructuring charges and income tax adjustments, while the reported quarter did not have any such adjustments.

Operational Update

MasTec’s net sales surged 53% year over year to record $1.89 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.49 billion. Oil and Gas segment’s revenues in the reported quarter soared a whopping 168% to $1.1 billion over last year's second-quarter level. The Electrical Transmission segment followed with a 1% rise to $96.6 million in revenues. The Communication segment’s revenues remained flat year over year at $592 million. Revenues in the Power Generation and Industrial segment plunged 49.3% to $60.7 million.

MasTec, Inc. Price, Consensus and EPS Surprise

 

MasTec, Inc. Price, Consensus and EPS Surprise | MasTec, Inc. Quote

Cost of sales in the quarter jumped 52% year over year to $1.63 billion. Gross profit was up 60.7% to $263.8 million from $164 million in the prior-year quarter. Gross margin expanded 70 basis points to 14% in the quarter.

General and administrative expenses flared up 4.4% to $70.8 million. MasTec reported operating profit of $147.6 million in the quarter, a substantial improvement from $55.7 million in the year-earlier quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved to $202 million compared with $104 million in the year-ago quarter.

Financial Details

MasTec reported cash and cash equivalents of $18.2 million as of Jun 30, 2017, considerably up from $8.8 million ras of Jun 30, 2016. The company recorded cash used from operations of $88 million for the six-month period ended Jun 30, 2017, compared with an inflow of $28.5 million recorded in the prior-year quarter. Long-term debt was $1,314 million as of Jun 30, 2017, compared with $961 million as of Dec 31, 2016.

MasTec recently completed two acquisitions, including a Texas-based provider of heavy civil, water, sewer and drainage systems infrastructure for private developers, state and local municipalities, and a leasing company of Oil & Gas specialty pipeline equipment.

Guidance

MasTec believes the acquisition of the Oil & Gas specialty equipment provider will bring down its overall equipment costs and provide competitive advantage during the current multi-year cycle of significant Oil & Gas pipeline project activity. Additionally, the geographic expansion of MasTec’s heavy civil operations, as well as entry into the water, sewer and drainage systems infrastructure market operations will provide an exciting platform to benefit from increasing demand trends in this market.

Buoyed by these factors, MasTec raised its 2017 guidance to new record levels. The company currently estimates 2017 annual revenue of approximately $6 billion, up from the prior guidance of $5.7 billion. The company now guides adjusted earnings per share of $2.73, up from the prior guidance of $2.45 for the full year. This marks a 29% increase over 2016. Additionally, MasTec estimates adjusted EBITDA to jump 30% to $620 million, up from the prior projection of $575 million.

Further, for third-quarter 2017, MasTec guided revenues to be roughly $1.65 billion. The company anticipates adjusted EBITDA of around $167 million and adjusted earnings per share of 73 cents.

Share Price Performance

In the last one year, MasTec has significantly outperformed the industry with respect to price performance. The stock gained around 87.7%, while the industry rose 9.34%.

Zacks Rank & Key Picks

MasTec currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are NCI Building Systems, Inc. (NCS - Free Report) , KB Home (KBH - Free Report) and Owens Corning (OC - Free Report) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NCI Building has expected long-term growth rate of 10.00%.

KB Home has expected long-term growth rate of 16.66%.

Owens Corning has expected long-term growth rate of 14.80%.

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