It has been about a month since the last earnings report for Quanta Services (PWR - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Quanta Services due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Quanta Services Lags on Q3 Earnings, Raises Guidance
Quanta Services Inc. reported third-quarter 2018 adjusted earnings of 88 cents per share, missing the Zacks Consensus Estimate of 99 cents by 11.1%. However, the reported figure notably increased 39.7% from 63 cents recorded a year ago. The bottom-line growth is attributable to robust top line and the sound execution of its projects.
Total revenues came in at a record level of $2.99 billion, surpassing the consensus mark of $2.95 billion by 1.3%. Also, the top line increased 14.6% year over year, aided by robust revenue growth across the board.
Of the total quarterly revenues, the Electric Power Infrastructure segment accounted for 54.2%, and Oil and Gas Infrastructure contributed 45.8%.
Revenues from Electric Power Infrastructure came in at $1,617.7 million, up 7.5% year over year. Operating income of $179.2 million was up 19.4% from the year-ago level. Also, operating margins surged 110 basis points (bps) to 11.1%.
Oil and Gas Infrastructure segment revenues grew 23.8% from the prior-year quarter to $1,367.5 million. In fact, operating income of $96.1 million was up 64.2% from the year-ago period. Operating margins of 7% were up 230 bps.
In the reported quarter, overall operating income came in at $192.6 million compared with the prior-year figure of $140.4 million. Operating margin surged 110 bps from a year ago.
At the end of Sep 30, 2018, Quanta Services’ 12-month record backlog was $7,484.2 million, up from $6,446.2 million on Dec 31, 2017.
As of Sep 30, 2018, Quanta Services’ cash and cash equivalents were $113.5 million, down from $138.3 million on Dec 31, 2017. The company’s long-term debt and notes payable (net of current maturities) was $952.9 million, up from $670.7 million as of Dec 31, 2017.
In the quarter under review, net cash provided by operating activities totaled $39.1 million, which is much lower than $173.6 million recorded in the year-ago quarter.
The company bought back more than $300 million of its common stock this year.
In October 2018, Quanta Services secured a contract by PacifiCorp to serve Aeolus via providing engineering, procurement and construction solutions to its Jim Bridger Transmission Line Project.
Also, in September 2018, the company signed a five-year sole-source transmission alliance agreement for $400 million with a municipal utility. Per the deal, Quanta Services will provide transmission, construction and maintenance services in Texas.
2018 Guidance Raised
Buoyed by strong performance through 2018 so far, the company remains optimistic about the fourth quarter of 2018, given strengthening of its base business activity that seasonally increases and ramped-up construction activity in its larger pipeline projects.
The company increased its adjusted earnings expectation for 2018 to the range of $2.70-$2.80 per share compared with prior anticipation of $2.55-$2.95. Considering the impressive operating performance so far in 2018, it increased its revenue projection to the range of $10.95-$11.05 billion from earlier expectation of $10.35-$10.75 billion.
EBITDA is now expected in the range of $813.3-$838.2 million (versus $763.3-$864.8 million projected earlier). Adjusted EBITDA is anticipated within $878.6-$903.6 versus $824.7-$926.2 million expected earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 17.24% due to these changes.
At this time, Quanta Services has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Quanta Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.