Updated Research Report on Quanta Services - Analyst Blog

On Mar 27, 2014, we issued an updated research report on Quanta Services Inc. PWR. The company had earlier reported better-than-expected quarterly results. Quanta benefited from increased spending on projects in the Electric Power segment to upgrade and deploy the electric power transmission infrastructure to improve system reliability and to deliver renewable electricity from new generation sources to demand centers. The company's oil and gas infrastructure services segment continues to perform well with significant revenue growth.

Quanta has delivered positive earnings surprises in all of the last four quarters, with an average beat of 12.9%. It delivered robust earnings in the fourth quarter of fiscal 2013, which was 17.1% above the Zacks Consensus Estimate.

Additionally, management provided an encouraging outlook for fiscal 2014. Quanta is positive about its performance going forward. It expects revenues for the first quarter of 2014 in the range of $1.65 billion to $1.75 billion. On a GAAP basis, the company expects earnings to be in the range of 36 cents to 38 cents.

Further, for full-year 2014, revenues are expected in the range of $7.4 billion to $7.8 billion, while earnings on GAAP basis are expected in the range of $1.65 to $1.85 per share.

Excluding the one-time items, non-GAAP adjusted earnings for 2014 are expected to be between $1.85 and $2.05 per share, compared with $1.71 per share in 2013.

The company's Electric Power segment continues to win large electric transmission projects and is expected to derive significant benefit from the transmission business. The company is also benefiting from the aging electric infrastructure that requires increased spending for maintenance to meet the reliability standards. Also, the rapid adaptation of the smart grid technology is expected to leverage the segment's business going forward.

Additionally, Quanta Services is one of the largest full-service providers of oil and gas infrastructure services in North America and is well placed to seize opportunities, driven by the development and production of resources from unconventional shale developments and Canadian oil sands. Development activity for gathering system infrastructure in liquid-rich shale is strong, and there are indications that demand for its transmission pipeline services had increased significantly in 2013 and the uptrend is likely to continue in 2014. In 2013, the company had benefited from the projects related to unconventional shale developments in certain regions of North America. Its pipeline-gathering activity has also remained active and the company experienced increased demand for its mainline pipe construction services in 2013 and booked more than $700 million in contracts during the second half of 2013.

However, the competitive nature of the industry and stringent regulatory and permit hurdles along with weak performance of the fiber optics business due to fluctuations in telecom services revenues are some of the headwinds the company faces.

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

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