MasTec (MTZ) Beats On Q3 Earnings & Revenues, Lifts View

MasTec, Inc. (NYSE:MTZ) reported third-quarter 2016 adjusted earnings per share of 78 cents (excluding one-time items barring non-cash stock compensation expense), a substantial improvement of 225% from the prior-year quarter’s adjusted earnings of 24 cents. Further, earnings beat the Zacks Consensus Estimate of 67 cents by a comfortable margin of 14% and came ahead of management's guidance of 69 cents per share. The better-than-expected earnings in the quarter was primarily driven by strength in the company’s Oil & Gas segment.

Including one-time items, MasTec reported earnings of 69 cents per share compared with 9 cents reported in the prior-year quarter.

Operational Update

MasTec’s net sales improved 43% year over year to $1586 million in the quarter, coming ahead of the Zacks Consensus Estimate of $1496 million as well as management’s guidance of $1.5 billion. The better-than-expected performance came on the back of increase in revenues across all segments, particularly led by the Oil and Gas segment which recorded a surge of 81% year over year to $736 million. The Electrical Transmission segment followed with a 34% rise to $101.7 million in revenues. The Communication segment witnessed 34% growth in revenues to $624.3 million while revenues in Power Generation and Industrial segment increased 7% to $123.6 million.

Cost of sales in the quarter advanced 41% year over year to $1,369 million. Gross profit improved 57% to $217.2 million from $138 million in the year-ago quarter. Gross margin expanded 130 basis points to 13.7% in the quarter.

General and administrative expenses increased 5% to $67 million. MasTec reported operating profit of $107.5 million in the quarter, a 233% jump from $32.3 million in the prior-year quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $165 million, compared with $91 million in the prior-year quarter.

Financial Details

MasTec ended the third quarter with cash and cash equivalents of $9.4 million, up from $7.1 million at the end of the prior-year quarter. The company generated cash flow from operations of $127 million in the nine month period ended Sept 30, 2016, compared with $260 million in the prior-year quarter. Long-term debt was $951 million as of Sep 30, 2016, compared with $933 million as of Dec 31, 2015. MasTec’s board has authorized the repurchase of up to $100 million worth of shares.

MASTEC INC Price, Consensus and EPS Surprise

MASTEC INC Price, Consensus and EPS Surprise | MASTEC INC Quote

Guidance

For full-year 2016, MasTec has raised its adjusted earnings per share guidance to approximate $1.73 from the prior guidance range of $1.57. Revenues are now projected at $5.1 billion, revised upward from the previous projected target of $5.0 billion. Additionally, the company expects its adjusted EBITDA of $455 million, higher than the previous expectation of $440 million.

Additionally, for fourth-quarter 2016, MasTec guided revenues to be roughly $1.3 billion. The company anticipates adjusted EBITDA of around $132 million and adjusted earnings per share of 54 cents. The company stated that opportunities in the Oil & Gas segment are expected to drive continued growth in 2017 and beyond.

Coral Gables, FL-based MasTec is a leading infrastructure construction company that operates primarily in North America and caters to a range of industries. Its services include engineering, building, installation, maintenance and upgrade of energy, utility and communications infrastructure as well as industrial infrastructure.

Zacks Rank

At present, MasTec sports a Zacks Rank #1 (Strong Buy).

Some similarly-ranked stocks in the construction sector are EMCOR Group Inc. (NYSE:EME) , Simpson Manufacturing Co., Inc. (NYSE:SSD) and Gibraltar Industries, Inc. (NASDAQ:ROCK) . All these stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

EMCOR group has witnessed a 1% increase in its earnings estimate to $3.20 per share for 2016 over the last seven days. Simpson Manufacturing has seen upward estimate revisions, over the last seven days and the Zacks Consensus Estimate is pegged at $1.89 per share. The Zacks Consensus Estimate for Gibraltar Industries has also moved up 9% over the last seven days to $1.58 per share.

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