Quanta Services (PWR) to Report Q4 Earnings: What's Up?

Quanta Services, Inc. PWR is scheduled to report fourth-quarter 2018 results on Feb 21, before the opening bell. In the last reported quarter, the company’s earnings came in at 88 cents per share, missing the Zacks Consensus Estimate by 11.1%. However, revenues of $2,985 million topped the consensus mark of $2,946 million by 1.3%.

Meanwhile, third-quarter earnings and revenues grew 39.7% and 14.6%, respectively, on a year-over-year basis, backed by robust revenue growth across the board.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

The Zacks Consensus Estimate for the quarter to be reported is currently pegged at 91 cents per share, remaining unchanged over the past 60 days. The estimate reflects 102.2% year-over-year growth. Total revenues are expected to be $2.95 billion, up 19.2% year over year.

Quanta Services, Inc. Price and EPS Surprise

 

Quanta Services, Inc. Price and EPS Surprise | Quanta Services, Inc. Quote

Factors at Play

Quanta Services is expected to generate higher revenues as well as earnings in the fourth quarter, given strengthening of base business activity that increases on a seasonal basis and ramped-up construction activities in larger pipeline projects.

The company remains optimistic about solid backlog levels in its end markets, as it enters a renewed multi-year up-cycle for businesses. This apart, Quanta Services sees acquisitions as a fundamental component of its strategy to boost market share and develop incremental backlog. The company’s continuous bolt-on acquisitions are anticipated to boost top-line growth in the upcoming quarters.

Segment Discussion

Quanta Services remains optimistic about end-market prospects of both its segments, namely Electric Power and Oil & Gas, over the next couple of years.

In the last reported quarter, the Electric Power Infrastructure Services segment (accounting for 54.2% of the total revenues) performed pretty well, courtesy of modest revenue growth (up 7.5% year over year) and solid margin expansion (up 110 basis points/bps) on the back of outstanding execution of a large transmission project.

For the said segment, Quanta Services expects fourth-quarter revenues to be sequentially lower due to typical seasonal trends. That said, operating margins are expected to grow in double digits in the quarter.

Meanwhile, communications business (included in the Electric Power segment) is expected to have performed well during the quarter. Of late, it continues to make inroads with customers, as they deploy capital for fiber-to-the-home and business, long-haul fiber, 4G wireless backhaul and the early stages of 5G. With expanding larger diameter pipeline market and a multi-year cycle ahead of it, the company remains optimistic about communications infrastructure services operations.

Given this backdrop, the Zacks Consensus Estimate for the segment’s fourth-quarter revenues is pegged at $1,628 million, reflecting growth from $1,575 million in the last reported quarter.

Meanwhile, Quanta Services’ Oil and Gas Infrastructure Services segment (accounting for 45.8% of the total revenues) looks equally promising, primarily owing to improving mainline and natural gas distribution, and integrity markets. The segment’s revenues were up 23.8% in the last reported quarter, primarily driven by increased construction activities by customers on larger diameter pipeline projects. Operating margins were up 230 bps in the quarter.

Sales and margins are expected to improve in the fourth quarter as well, aided by expected revenue growth from large diameter pipeline construction activities, along with continued improvement in gas distribution and base business.

The Zacks Consensus Estimate for the segment’s fourth-quarter revenues is currently pegged at $1,312 million, up from $904 million in the year-ago period.

What Does the Zacks Model Say?

Our proven model does not conclusively show that Quanta Services is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Ranks #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are a few construction stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming release:

Forterra, Inc. FRTA has an Earnings ESP of +8.99% and a Zacks Rank #2.

Toll Brothers Inc. TOL has an Earnings ESP of +1.91% and holds a Zacks Rank #3.

Owens Corning Inc. OC has an Earnings ESP of +5.83% and holds a Zacks Rank #3.

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