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Quanta Services (PWR) to Post Q4 Earnings: What's in Store?

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Quanta Services, Inc. PWR is scheduled to report fourth-quarter 2019 results on Feb 27, before the opening bell.

In the last reported quarter, the company’s top and bottom lines surpassed the Zacks Consensus Estimate, as well as increased year over year. Adjusted earnings of $1.14 per share and total revenues of $3.35 billion surpassed the consensus estimate by 9.6% and 6%, respectively. The top and bottom lines increased 12% and 29.5%, respectively.

The solid performance was backed by its focus on base business, long-term programmatic spend of utilities, and development of infrastructure that supports technology deployments such as 5G and electric vehicles.

Trend in Estimate Revision

The Zacks Consensus Estimate for earnings for the quarter to be reported has been unchanged at 84 cents per share over the past 60 days. The said figure indicates a 12.5% decrease from the year-ago earnings of 96 cents per share. The consensus mark for revenues is $3.03 billion, suggesting 2.6% year-over-year fall.

Quanta Services, Inc. Price and EPS Surprise

Factors to Note

Quanta Services’ fourth-quarter 2019 results are expected to be hurt by volatility in Pipeline and Industrial operations, and the absence of large projects in the Electric Power Infrastructure Services.

The Electric Power segment has been witnessing several unique challenges like absence of large projects, production and labor headwinds, and short-term mobilization delays. These headwinds are likely to have weighed on fourth-quarter 2019 margins.

Quanta Services generates lower revenues  in the fourth quarter than the third quarter. Also, the holiday season and inclement weather caused delays in project execution, which might have reduced revenues and increases costs.

That said, the company’s three-pronged growth strategy — which focuses on timely delivery of projects to exceed customer expectation, leverages on its core business for expansion in complementary adjacent service lines and continues exploring new service lines — has been gaining traction.

Markedly, the Zacks Consensus Estimate for fourth-quarter backlog is $14,430 million, indicating increase of 16.9% from $12,343 million a year ago and 8.6% sequentially.

Segmental Projections

Quanta Services’ Electric Power Infrastructure Services segment — which contributed 56% to third-quarter 2019 revenues — has been riding high on outstanding execution of a large transmission project. Its base business activities have been growing, courtesy of robust spending by electric utilities on grid modernization and infrastructure hardening — particularly in the western United States — as well as by gas utilities on distribution system modernization and safety programs. Acquisitions have been adding to the bliss.

The consensus estimate for the segment’s revenues is pegged at $1,913 million, implying 2% growth from $1,876 million in the last reported quarter and 15.3% from $1,659 million a year ago. Backlog in the segment is expected to be $9,259 million, suggesting 8.4% growth from $8,545 million a year ago.

However, its Pipeline and Industrial Infrastructure Services segment’s fourth-quarter 2019 results are likely to reflect headwinds associated with the absence of large projects and seasonality.

The consensus estimate for the segment’s revenues is pegged at $1,095 million, implying fall of 24.6% from $1,453 million reported in the year-ago period and 25.9% from $1,477 in third-quarter 2019. However, the consensus estimate for the segment’s backlog implies growth of 19.4% year over year to $4,534 million.

What Our Model Suggests

Our proven model doesn’t conclusively predict an earnings beat for Quanta Services this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Quanta Services — which shares space with AECOM ACM, KBR, Inc. KBR and Jacobs Engineering Group Inc. J in the same industry — has an Earnings ESP of 0.00% and currently carries a Zacks Rank #3. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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