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MasTec (MTZ) Surpasses Q3 Earnings Estimates, Guidance Up

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MasTec, Inc. (MTZ - Free Report) reported mixed results in the third quarter of 2018, with earnings surpassing the Zacks Consensus Estimate and revenues lagging the same.

Adjusted earnings of $1.33 per share trumped the Zacks Consensus Estimate of $1.23 by 8.1%. The bottom line marked an increase of 62.2% from prior-year 82 cents on lower cost of revenues.

Meanwhile, revenues of $1,977.2 million missed the consensus estimate of $1,983 million by 0.3%. However, revenues increased 1.1% year over year, primarily on an uptick in majority of the segments.

Despite facing regulatory and hurricane flooding disruptions, the company witnessed a strong third quarter. Moreover, the company raised its outlook on robust backlog level across multiple segments. Meanwhile, shares of MasTec jumped 3.7% following the results on Nov 1.

Operational Update

Cost of revenues in the quarter declined 2.6% year over year to $1.68 billion. However, general and administrative expenses rose 21% to $80.3 million.

Adjusted EBITDA was $226.3 million in the reported quarter compared with $179.6 million in the prior-year quarter. Adjusted EBITDA margin increased 220 basis points (bps) year over year but fell 40 bps sequentially to 11.4% from the year-ago quarter.


MasTec, Inc. Price, Consensus and EPS Surprise

Backlog Details

The company’s backlog as of Sep 30, 2018, was $7.8 billion, up by $114 million sequentially and $2.8 billion from the year-ago quarter.

Segment Update

The Power Generation and Industrial’s revenues surged 85% year over year to $179.6 million. However, adjusted EBITDA margin dropped 420 bps to 5.4% from the prior-year quarter.

Revenues at Communications grew 8.4% to $661.7 million year over year. Adjusted EBITDA margin increased 60 bps to 11.3%.

However, revenues at the Oil and Gas segment dropped 10.8% year over year to $1,035.9 million. Adjusted EBITDA margin increased 570 bps to 15%.

Electrical Transmission segment recorded a 21% increase in revenues to $99.1 million in the reported quarter. Adjusted EBITDA margin declined 240 bps to 3.1%.

Financial Details

MasTec reported cash and cash equivalents of $68.5 million at the end of the third quarter compared with $43.8 million at the end of the prior-year quarter. The company received around $700 million in cash flows at third-quarter end for the completion of Oil & Gas pipeline construction project.

Net cash flow provided by operations was $26.8 million as of Sep 30, 2018, compared with $166.5 million recorded at the end of the year ago quarter.

Long-term debt was $1.7 billion as of Sep 30, 2018, compared with $1.3 million as of Dec 31, 2017.

Moreover, the company repurchased 1.6 million shares in the third quarter along with approval of an additional $150 million share repurchase.

Guidance

For 2018, the company retained its revenue guidance of $6.9 billion.

Coming to non-GAAP measures, adjusted EBITDA is expected at $719 million or 10.4% of the revenues compared with $708 million or 10.3% of revenues expected earlier. Adjusted earnings are expected at $3.76 versus the prior expectation of $3.67.

For the fourth quarter of 2018, the company expects revenues of roughly $1.9 billion. Adjusted EBITDA is expected at $194 million, with adjusted earnings projected around $1.05.

The company expect 2018 cash flow from operations to exceed $550 million. Moreover, debt is expected in the range of $1.1-$1.2 billion, down from $1.7 billion as of Sep 30, 2018.

Zacks Rank & Key Picks

MasTec currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the Building Products – Heavy construction industry are Dycom Industries, Inc. (DY - Free Report) , EMCOR Group, Inc. (EME - Free Report) and North American Construction Group Ltd. (NOA - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dycom Industries reported better-than-expected earnings in two of the trailing four quarters, the average beat being 3.4%

EMCOR is expected to see earnings growth of 19.9% this year.

North American Construction expects 2018 earnings growth of 235.7%.

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