Quanta Services (PWR) Q2 Earnings: What's In The Cards?

Quanta Services Inc. (NYSE:PWR) is expected to report second-quarter 2016 results before the opening bell on Aug 4.

Quanta Services’ recent earnings history is a mixed bag, with two beats and one miss in the trailing four quarters, with a modest average positive surprise of 0.9%.In the last reported quarter, the company missed earnings estimates by 9%.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Quanta Services has been facing major headwinds in recent times, like harsh weather events, project delays and abrupt shifts in small transmission market dynamics. In addition, the collapse in oil prices, especially its effect on the Canadian economy, has been a significant drag on the company’s operations. We expect such conditions to undermine the company’s top line along with its profits in the upcoming quarter as well.

In addition, Quanta Services’ financials have been adversely impacted by the soft performance of its Electric Power Infrastructure business. The segment was plagued by headwinds like low customer spending, decline in emergency restoration services revenues and delays in project timing owing to regulatory and permitting issues related to large electric transmission projects.

Moreover, the company expects a decline in the volume of large transmission revenues, and this will likely weigh on revenues for the quarter under review.

At present, one of the biggest challenges for the company is obtaining the sighting and permission for energy infrastructure projects, including major electric transmission programs, and this continues to weigh on its profitability. Also, macroeconomic factors like volatility in oil & gas market, reduced consumer spending, strong U.S. dollar and unfavorable weather conditions may pose as concerns for second-quarter 2016 results.

On the positive side, an overall increase in spending for upgrade and expansion of transmission & distribution infrastructure, improving system reliability and delivering renewable electricity from new-generation sources to demand centers, will likely combat most of these challenges. Moreover, many of the company’s key customers in North America have robust capital programs in progress, which are focused on upgrading and expanding transmission and distribution infrastructure. This should translate into additional revenues for the company.

Also, Quanta Services recently booked large pipeline projects worth $800 million which will be carried out through 2016 and 2017. The projects include pipeline infrastructure works in North America to transport natural gas from production regions to load centers and natural gas power plants. Also, the company signed a contract to construct a pipeline project in Australia. These contracts should boost the company’s top line.

Quanta Services closed 11 acquisitions during 2015, thus positioning itself for solid internal growth. These acquisitions will likely bolster the company’s revenues during the to-be-reported quarter.

QUANTA SERVICES Price and EPS Surprise

QUANTA SERVICES Price and EPS Surprise | QUANTA SERVICES Quote

Earnings Whispers

Zacks ESP: Earnings ESP for the company currently stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 32 cents.

Zacks Rank: Quanta Services has a Zacks Rank #4 (Sell). As it is, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

B2Gold Corp. (NYSE:BTG) has an Earnings ESP of +50.00% and a Zacks Rank #1. The company is expected to release its quarterly results on Aug 4.

Hecla Mining Co. (NYSE:HL) has an Earnings ESP of +50.00% and a Zacks Rank #1. The company will report results on Aug 4.

Harsco Corporation (NYSE:HSC) has an Earnings ESP of +38.46% and a Zacks Rank #1. The company is expected to release earnings results on Aug 4.