Quanta Beats Estimates

Zacks Equity Research

Quanta Services Inc. (PWR) released its fourth quarter 2011 results before the opening bell today, reporting adjusted Non-GAAP earnings per share of 41 cents, above the Zacks Consensus Estimate of 34 cents and 23 cents in the prior-year quarter.

In 2011, adjusted Non-GAAP earnings came in at 83 cents per share versus 92 cents per share in 2010. This was above the Zacks Consensus Estimate of 65 cents per share.

Total Revenue

Total revenue for the quarter was $1.51 billion, rising 36.0% y/y and 20.8% sequentially. In 2011, revenues came in at $4.6 billion, increasing 18.0% from 2010. Consolidated backlog at the end of 2011 was a record $7.2 billion compared with $6.3 billion at the end of 2010.

Segment Details

Electric Power revenue in the quarter was $973.5 million, up 63.5% y/y and 18.3% sequentially. Natural Gas and Pipeline revenue came in at $379.3 million, down 5.1% y/y but up 46.4% sequentially, Telecommunications revenue was $130.8 million, rising 56.8% y/y but down 7.0% sequentially and Fiber Optic Licensing revenue was $29.6 million, up 1.1% y/y and 3.9% sequentially.

Segment wise, total backlog for 2011 came in at $5.0 billion, $1.35 billion, $529.6 million and $402.0 million in Electric Power, Natural Gas and Pipeline, Telecommunications and Fiber Optic Licensing segment, respectively.

Margins

Operating margin for the quarter was 6.1% compared to 4.9% in the prior-year quarter and 7.5% in the previous quarter. SG&A expense came at $99.5 million, rising 12.7% in the comparable quarter last year.

Segment operating margins were 13.4%, 11.9% and 49.4% in Electric Power, Telecommunications and Fiber Optic Licensing segment, respectively. Natural Gas and Pipeline segment reported an operating loss of $36.3 million during the quarter.

In 2011, gross margin came in at 13.4% versus 16.1% in the previous year. Operating margin was 4.7% versus 6.5% in 2010.

Balance Sheet

The company ended the year with cash and cash equivalents of $315.4 million, up from $539.2 million at the end of the previous year. Net accounts receivable came in at $1.1 billion, rising from $766.4 million at the end of the previous year.                                           

As of December 31, 2011, accounts payable and accrued expenses were $618.9 million, up from $416.0 million at the end of the previous year.

Outlook

Quanta expects revenues for the first quarter of fiscal 2012 to range between $1.25 billion and $1.35 billion and adjusted diluted EPS (Non-GAAP) is expected to be 19 cents to 21 cents.

For 2012, Quanta expects revenues to be in the range of $4.9 billion and $5.3 billion with adjusted diluted EPS (Non-GAAP) to fall within $1.08 and $1.28.

We continue to maintain a Neutral rating on Quanta Services, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

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