On Jul 11, 2014, we issued an updated research report on MasTec, Inc. (MTZ), a leading infrastructure construction company operating throughout the United States.
MasTec’s first-quarter earnings declined 28% year over year to 21 cents per share. The results were adversely affected by a severe winter, which caused disruptions in business. However, the reported figure surpassed the Zacks Consensus Estimate of 18 cents per share as well management’s expected earnings per share of 20 cents.
During the first quarter conference call, MasTec had discussed its second quarter guidance. For the second quarter of 2014, the company had projected revenues in the range of around $1.15 billion to $1.20 billion and earnings per share from continuing operations was expected to be around 53 cents. Subsequently in June, MasTec reduced its second quarter earnings per share guidance to 40 cents and also cut revenue guidance to around $1.1 billion.
The trimmed outlook reflects unexpected delays in wireless project spending and weaker than expected performance at the oil and gas segment. MasTec expects wireless project revenues to decline in the second quarter as various planned projects were deferred and or reduced in scope.
These unexpected revenue declines will negatively affect segment results representing the effect of reduced absorption of non-variable indirect and overhead costs. In addition, the company foresees that additional changes to levels of second half 2014 wireless project spending may also occur, although the level of potential changes cannot yet be estimated.
At the oil and gas segment, the company expects weaker results due to delays in project start up during the quarter. Pricing pressure on current quarter short-term, mid-stream pipeline activity will also hurt the results. Even though management anticipates oil and gas revenue levels to grow year over year, it will be lower than previous expectations, impacting anticipated second quarter oil and gas segment revenues by about $25-$30 million.
As of first quarter end, MasTec’s cash and cash equivalents amounted to $9 million, down substantially from $23 million as of fiscal 2013 end. Cash used in operating activities was $20.4 million in the first quarter compared with cash provided by operating activities of $26 million in the prior-year quarter. Decreased productivity and delay in the billing and collection process caused the year-over-year decline in cash flow.
MasTec is scheduled to release its second-quarter earnings results after the market closes on Monday, Aug 11, 2014. The Zacks Consensus Estimate for the quarter is currently pegged at 37 cents, reflecting a 15.34% year-over-year decline and lower than the company’s guidance. In fact the Zacks Consensus Estimate has gone down 26% to 37 cents in the past 60 days due to disappointing earnings as well as reduced guidance.
Other Stocks to Consider
At present, MasTec has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the building and heavy construction industry include Simpson Manufacturing Co., Inc. (SSD), Quanex Building Products Corp. (NX) and United Rentals, Inc. (URI). While Simpson Manufacturing sport a Zacks Rank #1 (Strong Buy), Quanex Building Products and United Rentals carry a Zacks Rank #2 (Buy).