Quanta Beats EPS, Ups Guidance

Zacks

Quanta Services Inc. (PWR) reported second-quarter 2012 recurring earnings per share of 31 cents, a penny above the Zacks Consensus Estimate and up a robust 107% from the prior-year quarter.

GAAP earnings were 36 cents a share in the quarter, up 20% from the Zacks Consensus Estimate and 89.5% year over year.

Total Revenue

Total revenue for the second quarter was $1.52 billion, up 51% year over year from $1.01 billion. The growth in revenue was primarily driven by increased demand for the company’s electric power and pipeline services. Consolidated backlog at the end of first six months of 2012 was $4.1 billion, compared with $3.2 billion at the end of the first six months of 2011.

Segment Details

Electric Power revenue in the quarter grew 66.9% to $1.0 billion from $667.1 million in the prior-year period. Natural Gas and Pipeline revenue increased 22.4% year over year to $340 million from $209.7 million, Telecommunications revenue was $133.6 million, up 8.8% from $106.4 million and Fiber Optic Licensing revenue crept up 1.9% year over year to $28.7 million from $27.8 million.

Segment wise, total backlog came in at $2.8 billion, $829 million, $341.4 million and $1.104 million in Electric Power, Natural Gas and Pipeline, Telecommunications and Fiber Optic Licensing segment, respectively.

Income and Expenses

Operating income in the quarter was $111.1 million versus $57.7 million in the prior-year quarter. SG&A expense was $114.7 million compared with $89.5 million in the comparable quarter last year.

Segment operating income was $111.2 million, $15.3 million, $13.8 million and $15.2 million for Electric Power, Natural Gas and Pipeline, Telecommunications and Fiber Optic Licensing segment, respectively.

Recent Update

During the quarter, the company received two projects; one for Transmission Development in the Hanna Region and the other for CREZ Transmission Construction.

Balance Sheet and Cash Flow

Cash and cash equivalents at the end of the quarter was $172.8 million with shareholders equity of $3.5 billion.

Outlook

Driven by strong performance in the second quarter, Quanta raised its guidance for fiscal 2012. For fiscal 2012, Quanta now expects revenue in the range of 5.9 billion to $6.1 billion, up from the previous guidance of $5.4 billion to $5.7 billion.

Diluted earnings per share for the full year are expected between $1.15 and $1.25, up from $1.00 to $1.20 projected earlier.

Quanta raised the adjusted diluted earnings per share (non-GAAP) guidance for the full year 2012 to $1.35 to $1.45 from the earlier forecast of $1.19 to $1.39.

For the third quarter of 2012, revenue is expected to be in the range of $1.6 billion to $1.7 billion while diluted earnings per share are projected in the range of 34 cents to 37 cents. Quanta expects adjusted diluted earnings per share (non-GAAP) in the range of 39 cents to 42 cents for third quarter 2012.

The overall outlook for Quanta's business is positive and has led to improved expectations for the full year 2012.  However, the company's customers continue to experience regulatory and permitting challenges on projects and economic conditions continue to be a headwind.

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.

We continue to maintain our long-term Neutral recommendation on Quanta Services, with a Zacks #2 Rank (Buy rating) over the short term (1-3 months).

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