Coverage Initiated on MasTec - Analyst Blog

On Apr 11, 2014, we initiated coverage on leading infrastructure construction company, MasTec, Inc. MTZ. MasTec reported upbeat fourth-quarter results along with record revenues, earnings per share and EBITDA for 2013, outperforming the prior 4 consecutive years of record performances on Feb 28.

Adjusted earnings per share increased 13% to 53 cents in the fourth quarter and advanced 25% to a record $1.90 for 2013. MasTec's net sales increased 24% year over year to $1.16 billion in the quarter. In 2013, revenues increased 16% year over year to $4.32 billion, helped by strong revenue growth across most segments.

For 2014, MasTec expects revenues to be around $4.65 billion to $4.7 billion and adjusted EBITDA between $520 and $525 million. The company now expects adjusted earnings per share to be in the range of $2.27 to $2.30. The guidance, when compared with 2013, reflects the negative impact of foreign currency translations related to its Canadian operations.

The company's end markets offer compelling growth opportunities. The Communications segment has immense potential for progress given the continued developments in wireless technology. Wireless and fiber optic communication network upgrades will continue to increase in 2014. The segment is poised to benefit from incremental opportunities and contract awards from AT&T, Inc. T and Sprint Corporation S. Wireline also has the potential to drive growth on the back of large data demand and the subsequent need for continued broadband expansion. The recent announcement from multiple carriers about 1 gigabit speeds to residential customers will require a significant fiber expansion opening up a sizable opportunity for MasTec.

The Power Generation segment will profit from the increasing demand for more domestic, environmentally sensitive electrical power production, such as wind and solar collection farms will support. MasTec booked $200 million in wind work in the quarter and since the end of the year, the company either signed or was verbally awarded an additional $200 million in new awards, some of which go into 2015. The company expects a significant improvement in the wind market in 2014. The Electrical transmission segment will gain support from the maintenance, upgrade and expansion of the nation's electrical grid.

In the second quarter, MasTec acquired Calgary, Alberta-based oil and gas pipeline and facility construction services company, Big Country Energy Services, and its affiliated operating companies operating together in North America. The acquisition will enhance MasTec's ability to take advantage of the rapidly increasing opportunities anticipated for pipeline energy infrastructure work in North America.

Other Stocks to Consider

MasTec currently carries a Zacks Rank #1 (Strong Buy). Another stock in the same sector that warrants a look is India Globalization Capital, Inc. IGC with a Zacks Rank #2 (Buy).