Strong 1Q Earnings at MasTec

Zacks

MasTec, Inc.’s (MTZ) adjusted earnings increased an impressive 93% to 27 cents per share in the first quarter of 2013 from the adjusted earnings of 14 cents a share in the year-ago quarter. The results were ahead of the Zacks Consensus Estimate of 24 cents. It was also better than expected from management’s previous guidance of 24 cents a share.

Earnings in the reported quarter exclude an after tax loss on debt extinguishment of 4 cents per share. Including this, earnings grew 64% to 23 cents per share from the prior-year quarter’s earnings of 14 cents.

Operational Update

MasTec posted record net sales of $919 million in the first quarter, increasing 24% year over year, beating the Zacks Consensus Estimate of $841 million. Revenues exceeded the company’s prior guidance of $850 million. The organic revenue growth rate was 19% in the reported quarter, driven by the growth in oil and gas pipeline and facilities, electrical transmission and wireless construction.

Cost of sales went up 21% to $791.5 million in the reported quarter. Gross profit improved 47.8% to $127 million from the year-ago quarter. Gross margin expanded 210 basis points (bps) year over year to 13.8% in the quarter.

General and administrative expenses increased 31% to $48.8 million in the quarter. Operating profit improved 66% to $46.5 million in the quarter from $28 million in the prior-year quarter. Consequently, operating margin expanded 120 bps year over year to 5%.

Financial Details

Cash and cash equivalents were $109 million as of Mar 31, 2013 compared with $15.8 million as of Mar 31, 2012. Cash flow from operating activities was $31.8 million in the reported quarter compared with $43.4 million in the prior-year quarter. Long-term debt amounted to $685.4 million as of Mar 31, 2013, compared with $546.3 million as of Dec 31, 2012. The debt-to-capitalization ratio expanded to 43.6% as of Mar 31, 2013 from 38.8% as of Dec 31, 2012.

Outlook

For the full year 2013, MasTec expects revenue to be at the upper end of the prior range, at $4.0 billion. MasTec however, raised the projection for continuing operation’s adjusted EBITDA to $425 million from the previous band of $410 million to $420 million. MasTec now expects adjusted diluted earnings per share estimate of $1.80 which includes 4 cents to 5 cents per share of additional interest costs related to the recently upsized senior note offering.

For the second-quarter 2013, the company projected about $950 million of revenue, continuing operations EBITDA is estimated to be $103 million and diluted earnings per share from continuing operations is expected to be around 42 cents. MasTec believes that its capital structure would continue to improve and expects to have adequate capital to take full advantage of various growth opportunities.

Coral Gables, FL-based MasTec is a leading infrastructure construction company operating mainly throughout North America across a range of industries. Its activities include engineering, building, installation, maintenance and upgrade of energy, utility and communications infrastructure and industrial infrastructure.

MasTec currently retains a short-term Zacks Rank #4 (Sell). Other companies in the building and heavy construction industry with favorable Zacks Ranks are China Communications Construction Company Limited (CCCGY), Orion Marine Group, Inc (ORN) and Zhejiang Expressway Co. Ltd. (ZHEXY). While China Communications Construction holds a Zacks Rank #1 (Strong Buy), Orion Marine and Zhejiang Expressway carry a Zacks Rank #2 (Buy).

 

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