Quanta Services Outperforms

Zacks

Quanta Services Inc. (NYSE:PWR - News) released its second-quarter 2011 results before the opening bell today, reporting adjusted earnings per share of 19 cents, above the Zacks Consensus Estimate of 15 cents and 22 cents in the prior-year quarter.

Total Revenue

Total revenue for the quarter was $1.01 billion compared with $870.5 million in the prior-year quarter. The result for the quarter includes contribution from Valard acquisition, completed on October 25, 2010. Consolidated backlog at the end of the quarter was $6.9 billion compared with $6.56 billion at the end of the prior-year quarter.

Segment Details

Electric Power revenue in the quarter was $667.1 million compared with $463.4 million in the prior-year period. Natural Gas and Pipeline revenue came in at $209.7 million compared with $263.1 million, Telecommunications revenue was $106.4 million compared with $117.7 million and Fiber Optic Licensing revenue was $27.8 million compared with $26.4 million.

Segment wise, total Backlog came in at $4.76 billion, $1.16 billion, $569.0 million and $414.7 million in Electric Power, Natural Gas and Pipeline, Telecommunications and Fiber Optic Licensing segment, respectively.

Income and Expenses

Operating income in the quarter was $57.7 million compared with $64.8 million in the prior-year quarter. SG&A expense was $89.5 million compared with $82.1 million in the comparable quarter last year.

Segment operating income was $31.3 million and $12.0 million in Electric Power and Fiber Optic Licensing segment, respectively. Natural Gas and Pipeline and Telecommunications segment reported operating loss of $37.0 million and $3.6 million, respectively.

Recent Update

During the quarter, the company received two CREZ Transmission contracts and also invested $35 million in Howard Midstream Energy Partners, LLC (NYSE:HEP - News), thus attaining about 39% interest in HEP. Quanta continues to develop new products and has increased renewable activity.

Many projects of the company have attained regulatory clearance with construction scheduled to begin in the fourth quarter of the year. The company believes all these factors will accelerate its revenue and profit growth in 2011 and beyond.

During the quarter, the company started a share repurchase program under which Quanta's board authorized the purchase, from time to time, of up to $150 million of its outstanding common stock. The program was initiated from May 9, 2011 and as of now, the company has repurchased 4.9 million shares for about $94.5 million in cash.

The company has amended and restated its senior secured revolving credit facility, expanding it from $475 million to $700 million. The maturity date was extended to Aug. 2, 2016.

Balance Sheet and Cash Flow

Cash and cash equivalents at the end of the quarter was $380.4 million with shareholders equity of $3.3 billion.

Outlook

Quanta expects revenues for the third quarter of 2011 to range between $1.16 billion and $1.30 billion and diluted earnings per share to be in the range of 21 cents to 27 cents. Adjusted diluted earnings per share (non-GAAP earnings) is expected to be 25 cents to 31 cents for third quarter of 2011.

The company provided fourth-quarter 2011 revenue guidance of $1.28 billion and $1.44 billion and diluted earnings per share to be in the range of 38 cents to 42 cents. Adjusted diluted earnings per share (non-GAAP earnings) is expected to be 42 cents to 46 cents for the quarter.

For 2011, Quanta expects revenue to be in the range of $4.3 billion and $4.6 billion. Diluted earnings per share guidance for 2011 is expected to be between 65 cents and 75 cents. Quanta expects adjusted diluted earnings per share for the full-year 2011 to range from 80 cents to 90 cents.

Quanta Services Inc. is a leading national provider of specialty contracting services, and is one of the largest contractors serving the transmission and distribution sector of the North American electric utility industry.

Effective during the quarter ended Sep 30, 2009, Quanta began reporting its results under four reportable segments: (1) Electric Power Infrastructure Services, (2) Natural Gas and Pipeline Infrastructure Services, (3) Telecommunications Infrastructure Services and (4) Fiber Optic Licensing. Major competitors of Quanta Services are EMCOR Group Inc. (NYSE:EME - News), Integrated Electrical Services Inc. (NasdaqGM:IESC - News) and MYR Group Inc. (NasdaqGS:MYRG - News).

We continue to maintain a Neutral rating on Quanta Services, with a Zacks #2 Rank (Buy recommendation) over the next one-to-three months.

QUANTA SVCS INC (PWR): Read the Full Research Report

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