By Sam Boughedda
UBS analyst Steven Fisher upgraded infrastructure services provider Quanta Services (NYSE:PWR) to Buy from Neutral, raising the firm's price target on the stock to $156 from $140.
Fisher wrote to investors on Monday that as the solar inquiry overhang is cleared, for now, they have come off of the sidelines.
"We move back to a Buy on PWR, now that the solar overhang has cleared, and we have more confidence in EPS growth ahead from electric grid investment and renewed upside potential from midstream," said Fisher. "We downgraded PWR to Neutral in mid-April, arguing that despite a strong backdrop for PWR's EPS growth, the overhang from the solar investigation and the stock at an all-time high near $140 capped upside potential and warranted a risk element to be factored into the P/E. That no longer supported a Buy rating at that time."
However, he says now, with the overhang cleared, pressure should be removed from the P/E with continuing momentum for the electric business and new and growing opportunities for the underground business.
"The multiple is still >1x below where it was in mid-April (19.2x vs 20.5x-20.8x), and we expect it to re-rate back towards that level. Combined with robust earnings growth, that makes the stock a Buy, in our view. We expect EPS to grow at a 14% CAGR through 2024, ~130bps ahead of consensus."