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5 Factors That Underscore MasTec's Solid Growth Prospects

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MasTec, Inc.’s (MTZ - Free Report) business has been benefiting from solid backlog numbers, and strong contribution from Communications, Transmission and Power Generation segments. Notably, shares of MasTec have gained 19.2% so far this year, outperforming its industry’s 14% growth. On a further encouraging note, the company’s earnings have surpassed the Zacks Consensus Estimate for 14 consecutive quarters.

Recently, the company reported better-than-expected results in first-quarter 2019, wherein the top and bottom lines surpassed the Zacks Consensus Estimate by 6.1% and 34.9%, respectively. Also, adjusted earnings of 58 cents per share increased by an impressive 65.7% year over year. Revenues of $1,518.3 million also increased 8.7% from a year ago.



The company’s larger-scale telecommunication projects in both wireline and wireless markets, sizeable growth in the Power Generation & Industrial segment, along with strong buyout strategy help it post improved year-over-year results.

Earnings estimates for 2019 and 2020 have been trending upward over the past 30 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

What Makes MasTec a Solid Pick?

Robust Backlog to Drive Revenues: MasTec is poised to gain from significant amounts of project awards across the segments. As of Mar 31, 2019, the company achieved a record 18-month backlog of $8 billion, reflecting an increase of 12% from the comparable prior-year period. This marks the sixth consecutive quarter of record backlog, reflecting strong demand in its end markets for 2019 and beyond. Notably, it expects record revenues of $7.6 billion in 2019. Revenue growth will be primarily driven by Communications, Transmission and Power Generation segments.

Communication Business Reveals Significant Opportunities: The Communications segment will benefit from multi-year demand for tower, small cell and fibre deployments, along with the execution of transformational 5G wireless. Fiber expansion continues to be a major growth driver for the wireline market.

The company expects strong nationwide fiber deployment projects from both telephone companies and cable TV companies to provide it with significant opportunities in the coming years. Currently, it has undertaken two major initiatives for the fiber business that are expected to lead to significant growth, in turn accelerating second-half 2019, as it moves from the early stage of engineering into construction, which carries a higher-dollar value.

Strong Power Generation and Industrial & Oil and Gas Unit: The company’s Power Generation and Industrial segment has been one of the significant drivers of revenues over the last few quarters. In the first quarter of 2019, revenues surged an impressive 61.5% year over year. Also, organic revenues increased 58% from the year-ago period. The segment’s backlog increased to $716 million from $707 million at the end of the comparable period of 2018 and from $678 million sequentially. The positive performance was backed by operational improvements carried out in the segment.

The Oil & Gas business is currently well poised to deliver growth in the coming years on the back of improving commodity price environment and U.S. market. Notably, the segment’s adjusted EBITDA margins improved an impressive 1110 basis points during the first quarter. It remains confident that adjusted EBITDA margins will improve approximately 15% in 2019 from the comparable prior-year period, benefiting from higher margin and smaller pipeline project work.

Strategic Acquisitions, Upbeat Views: MasTec rides high on solid acquisition strategy. The company completed two acquisitions during first-quarter 2019. It acquired all the interests of a water management and pipeline systems specialized company within the Oil and Gas segment. Also, it bought certain assets and liabilities of a company specialized in the construction and maintenance of cell towers in the Communications unit. During the quarter, acquisitions contributed approximately 2.6% to total consolidated revenues of the company.

Notably, MasTec increased 2019 adjusted EBITDA projection to $795 million from $780 million expected earlier. The projection is also higher than $721 million recorded in 2018. Adjusted earnings per share are now anticipated at around $4.55 versus $4.34 expected earlier. The estimated figure is up 20.7% from the 2018 level.

Superior ROE: MasTec’s return on equity (“ROE”) supports its growth potential. The company’s ROE of 21.3% compares favorably with the industry’s average of 11.8%, implying that it is efficient in using its shareholders’ funds.

Other Stocks to Consider

Other top-ranked stocks in the same space include Great Lakes Dredge & Dock Corp. (GLDD - Free Report) , EMCOR Group, Inc. (EME - Free Report) and Primoris Services Corp. (PRIM - Free Report) . While Great Lakes and EMCOR sport a Zacks Rank #1, Primoris carries a Zacks Rank #2 (Buy).

Great Lakes, EMCOR and Primoris’ earnings for the current year are expected to grow 300%, 11% and 13.3%, respectively.

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