Quanta Services (PWR) Q1 Earnings Miss, Revenues Up Y/Y (Revised)

Quanta Services Inc. (NYSE:PWR) reported first-quarter 2017 adjusted earnings (including adjustments for stock-based compensation expense) of 34 cents per share, missing the Zacks Consensus Estimate of 38 cents by 10.5%.

The company’s non-GAAP earnings from continuing operations came in at 39 cents, up 69.6% from the prior-year quarter tally of 23 cents. The bottom-line growth is attributable to a robust top line and sound execution of projects.

Inside the Headlines

Total revenue in the quarter came in at $2,178.2 million, up an impressive 27.1% on a year-over-year basis. In addition, the figure trumped the Zacks Consensus Estimate of $2,005 million. Robust growth of revenues at the Oil and Gas Infrastructure segment acted as the primary catalyst.

Of the total quarterly revenue, the Electric Power Infrastructure segment accounted for 56%, and the Oil and Gas Infrastructure segment represented 44%.

Segment wise, revenues from Electric Power Infrastructure were up 2.7% year over year to $1,219.5 million. However, Oil and Gas Infrastructure segmental revenues were up a whopping 82.0% to $958.7 million.

In first-quarter 2017, operating income came in at $75.1 million, more than double when compared with the prior-year tally of $37.3 million.

At the end of Mar 31, 2017, Quanta Services’ consolidated total backlog was $9,239.2 million, down from $10,083.2 million at the end of last year.

Liquidity

Quanta Services exited the quarter with cash and cash equivalents of $106.5 million, down from $112.2 million as of Dec 31, 2016. At quarter end, the company’s long-term debt and notes payable was $419.3 million, up from $353.6 million as of Dec 31, 2016.

Notable Developments

During the reported quarter, Quanta Services closed on First Infrastructure Capital (“FIC”), a partnership between the company and select infrastructure investors. FIC can offer approximately $750 million of capital for investment in infrastructure projects in markets served by Quanta. Going forward, additional capital from the existing FIC partners are likely to be provided to the venture.

This apart, the company also finally resolved the issue of litigation, initiated by Dycom Industries, Inc. (NYSE:DY) . According to the lawsuit, Quanta Services was supposed to dispose of certain communications construction operations to Dycom in Dec 2012. Following the resolution of the issue, Quanta is now free to expand its communications infrastructure footprint in the U.S.

Guidance Raised

Concurrent with the first-quarter 2017 results, the company revised its full-year top- and bottom-line guidance upward. Quanta Services now expects revenues to lie in the range of $8.1–$8.6 billion compared with the previously guided range of $7.9–$8.5 billion. In addition, the company raised its full-year adjusted earnings per share guidance from $1.80–$2.05 to $1.82–$2.07.

To Conclude

Quanta Services recorded sturdy year-over-year top- and bottom-line growth during the reported quarter. Sturdy foothold in the mainline pipe markets, lucrative project wins and robust backlog levels signal brighter days ahead. The resolution of the lawsuit with Dycom is a major positive as it will unlock multiple opportunities for the company’s infrastructure services operations in the U.S.

Quanta Services believes that the delivery of energized services differentiates it from its competitors and helps win new businesses. Despite these positives, this Zacks Rank #3 (Hold) company has been grappling with adverse weather conditions in recent times. Furthermore, unfavorable timing of revenues and corresponding income contributions of certain projects remain concerns for the company’s operational results. In addition, fluctuations in the timing of large projects have also been hurting the company’s financials for the last few quarters.

Key Picks

Better-ranked stocks in the broader sector include Louisiana-Pacific Corp. (NYSE:LPX) , and Century Communities, Inc. (NYSE:CCS) . While Louisiana-Pacific sports a Zacks Rank #1 (Strong Buy), Century Communities holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Century Communities registered a positive average surprise of 6.6% for the four trailing quarters, beating estimates all through.

Louisiana-Pacific registered an impressive average positive earnings surprise of 66.3% in the last four quarters.

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(We have re-issued this blog to correct an error. The original version, issued earlier today, should no longer be relied upon.)