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MasTec (MTZ) Beats Q2 Earnings Estimates, Raises Guidance

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MasTec, Inc. (MTZ - Free Report) reported mixed results in the second quarter of 2018, wherein earnings surpassed analysts’ expectations while revenues lagged the same.

Adjusted earnings of $1.04 per share surpassed both the Zacks Consensus Estimate and prior-year quarter’s figure of $1.03 by 1%. The improvement in earnings is attributed to lower costs and expenses.

Quarterly revenues of $1.6 billion missed the consensus estimate of $1.8 billion by 9.5%. Revenues also declined 14% year over year, primarily due to anticipated timing variances in large project activity in the Oil & Gas segment.

Operational Update

Cost of revenues in the quarter decreased 16% year over year to $1.4 billion. General and administrative expenses declined 4.5% to $67.6 million.

Adjusted EBITDA was $191.1 million in the reported quarter compared with $202.3 million in the prior-year quarter. Adjusted EBITDA margin increased 110 basis points (bps) to 11.8% from the year-ago quarter. This was backed by improved performance in its Oil & Gas and Communications segments.

Backlog Details

The company’s backlog as of Jun 30, 2018 was $7.7 billion, which increased from $168 million sequentially and 47% or $2.5 billion from a year ago.

MasTec, Inc. Price, Consensus and EPS Surprise

 

Segment Update

The Power Generation and Industrial’s revenues surged 140.5% year over year to $146 million. However, adjusted EBITDA margin decreased 110 bps to 6.7% from the prior-year quarter.

Also, the Communications revenues grew 4.5% to $618.6 million year over year. Adjusted EBITDA margin increased 180 bps to 11.9%.

However, revenues from the Oil and Gas segment dropped 32.5% year over year to $769.3. Adjusted EBITDA margin increased 240 bps to 15.9%.

Electrical Transmission segment recorded a 12.5% decline in revenues to $84.5 million in the reported quarter.

Financial Details

MasTec reported cash and cash equivalents of $20.7 million at the end of the current quarter compared with $18.2 million at the end of the prior-year quarter. Long-term debt was $1.5 billion as of Jun 30, 2018 compared with $1.3 million on Dec 31, 2017.

Net cash flow provided by operations was $23.2 million in the first half of 2018 compared with $100.2 million recorded a year ago.

Guidance

For full-year 2018, the company retained its revenue guidance of approximately $6.9 billion.

Coming to non-GAAP measures, adjusted EBITDA is expected to be approximately $708 million or 10.3% of the revenues compared with $700 million or 10.2% of the revenues expected earlier. Adjusted earnings are expected at $3.67 from prior expectation of $3.65.

For the third quarter of 2018, based on updated scheduled projects for large Oil & Gas project activity, the company expects revenues of roughly $2.0 billion. Adjusted EBITDA is expected to be approximately $220 million, with adjusted earnings likely to come in at $1.26 per share.

Share Price Performance

MasTec has outperformed its industry so far this year. The stock has gained around 3.3% against its industry’s decline of 10.8 % in the said period.



Zacks Rank & Key Picks

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

Some better-ranked stocks in the same space are Granite Construction Incorporated (GVA - Free Report) , Orion Group Holdings, Inc. (ORN - Free Report) and EMCOR Group, Inc. (EME - Free Report) . While Granite Construction sports a Zacks Rank #1 (Strong Buy), both Orion Group and EMCOR carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Granite Construction has an expected current-year earnings growth rate of 111.1%.

Orion Group’s expected 2018 earnings growth rate is 321.43%.

EMCOR is expected to register an EPS growth rate of 15% this year.

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