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MasTec (MTZ) reported earnings 30 days ago

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It has been about a month since the last earnings report for MasTec (MTZ - Free Report) . Shares were flat in that time frame, underperforming the S&P 500.

Will the recent trend continue leading up to its next earnings release, or is MasTec due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

MasTec Surpasses Q3 Earnings Estimates, Guidance Up

MasTec, Inc. 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.

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.

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.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, MasTec has an average Growth Score of C, though it is lagging a bit 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.

Outlook

MasTec has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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