MasTec Rides On Wireline And Wireless Business Prospects

On May 10, we issued an updated research report on MasTec, Inc. MTZ. Backed by the record backlog, solid demand this the infrastructure construction company expects a record performance in 2018. MasTec is poised to gain from significant number of project awards across multiple segments. Further, its strong cash flow, solid capital structure and ample liquidity will provide financial flexibility to support significant growth opportunities.

 

Let's analyze these growth factors in detail.

 

Geared up for a Record 2018 Performance

 

The year 2017 marked the second consecutive year of record financial performance for MasTec. The momentum continued in the first quarter-2018 as well. At the quarter-end, the company's 18-month backlog was a record $7.6 billion, an increase of 33% from the prior-year quarter end. This included record segment level backlog in Communications, Oil & Gas and Power Generation & Industrial.

 

Driven by record backlog and solid demand for its services across multiple markets, the company anticipates delivering another record year in 2018. It projects 2018 annual revenues to be at record levels of $6.9 billion. Revenue growth will primarily be driven by the Communications, Transmission and Power Generation segments. Driven by the backlog generated from the combination of increased renewable project activity and the expansion of services into biomass and other smaller production facilities, the Power Generation & Industrial segment will exhibit sizable growth.

 

The Communications segment will benefit from fiber deployments, FirstNet and the beginning of 5G rollouts. The Transmission and Power Generation business will continue to gain from backlog growth. The pipeline business is poised to benefit from a large multi-year cycle of large project buildouts.

 

Wireless & Wireline Businesses to Propel Growth

 

MasTec's wireless business has significant potential given that substantial investments are expected in wireless infrastructure related to the densification associated with 5G deployment. Every major carrier has publicly announced plans and initiatives for 5G. Moreover, AT&T Inc. T was awarded FirstNet — a nationwide public safety wireless network. In the recent announcement between T-Mobile and Sprint Corpration S, management guided to a potential network investment of $40 billion over a three-year period.

 

In its wireline markets, fiber expansion continues to be a growth driver. It is just the beginning of the most aggressive fiber build cycles in its history. A number of customers are aggressively deploying fiber assets, and these levels will significantly increase in 2018, with a considerable ramp up in 2019. The company anticipates strong nationwide fiber deployment projects from both telephone companies and cable TV companies that will provide it with significant opportunities over the coming years.

 

Acquisitions to Drive Revenues

 

In 2017, MasTec completed three acquisitions. The company acquired SEFNCO Communications, Inc., a telecommunications service provider, which will expand MasTec's geographic and customer capacity in the wireline/fiber deployment market. Further, its buyout of Texas-based infrastructure construction company — Cash Construction — will provide exposure to the growing water market.

 

The company also acquired a leasing company of Oil & Gas specialty pipeline equipment. This buyout is anticipated to help prune overall equipment costs as well as provide a competitive advantage during the current multi-year cycle of significant Oil & Gas pipeline project activity. Furthermore, the geographic expansion of heavy civil operations and entry into the water, sewer and drainage systems infrastructure market operations will open up opportunities to capitalize on the increasing demand trends in this market.