Shares of MasTec, Inc.
(MTZ - Free Report
) are riding high on positive earnings surprise, upbeat outlook, robust backlog and strong demand. Following the company’s quarterly results on Apr 30, its shares have gained 11.3%, outperforming the industry’s growth of 6.4%. Further, this leading infrastructure construction company has a long-term earnings growth rate of 14%, making us confident of its inherent strength.
Let’s delve deeper and find out what’s fueling this stock.
Upbeat Outlook for 2018
The year 2017 marked the second consecutive year of record financial performance for MasTec. The momentum continued in first quarter-2018 as well. At the quarter-end, the company’s 18-month backlog was a record $7.6 billion. The company projects 2018 annual revenues to be at record levels of $6.9 billion driven by record backlog and solid demand for its services across multiple markets.
The Communications segment will benefit from fiber deployments, FirstNet and the beginning of 5G rollouts. The Transmission and Power Generation business will continue to gain from backlog growth. The pipeline business is poised to benefit from a large multi-year cycle of large project buildouts.
MasTec anticipates record adjusted earnings per share of $3.65, which marks a rise of 25% over the prior-year levels, higher than its previous guidance of $3.45. Additionally, it estimates adjusted EBITDA be around $700 million, up from its previous guidance of $685 million.
Other factors that make MasTec a favorable investment include,
Positive Earnings Surprise History: MasTec has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 38.25%.
Estimates Moving North: The Zacks Consensus estimates for earnings for 2018 and 2019, have moved up in the past 30 days, reflecting the positive outlook of analysts on the stock. For 2018, the Zacks Consensus Estimate has climbed 5% to $3.64 per share and for 2018, the same has moved north 4% to $4.18.
Solid Zacks Rank, Score Combination:
MasTec sports a Zacks Rank #1 (Strong Buy). It has a VGM score
of B. Here V stands for Value, G for Growth and M for Momentum. The company’s score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) make solid investment choices.
Return on Equity: MasTec’s trailing 12-month return on equity (ROE) supports growth potential. Its ROE in the trailing 12 months is 16.5%, much higher than the industry’s average of 11.1%. This reflects the company’s efficient usage of shareholders’ funds.
Stock Seems Undervalued: MasTec has a trailing 12-month price earnings (P/E) ratio of 19.6 while the industry’s average trailing 12-month P/E ratio is 22.2. Based on this ratio, the stock seems undervalued.
Other Stocks to Consider
PGT Innovations has an expected long-term growth rate of 19%. Its shares have appreciated 55% in a year’s time.
Sterling Construction has an expected long-term growth rate of 11%. Its shares have gone up 17% in a year’s time.
Installed Building Products has an expected long-term growth rate of 30%. Its shares have gone up 25% in a year’s time.
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