MasTec, Inc. MTZ has been riding high on strong backlog and growth prospects from Communications, Transmission and Power Generation segments. The company is poised to benefit from larger-scale telecommunication projects in both wireline and wireless markets, and sizeable growth in the Power Generation & Industrial segment.
Shares of MasTec have gained more than 12% over the past three months, outperforming its industry’s 9% growth. On a further encouraging note, the company’s earnings have surpassed the Zacks Consensus Estimate for 13 consecutive quarters.
Earnings estimates have been upwardly revised over the past few weeks, suggesting that sentiments on MasTec are moving in the right direction. Earnings estimates for 2019 and 2020 have moved 3.1% and 5.1% upward, respectively, over the past 60 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What Makes MasTec a Solid Bet?
Higher Backlog Will Drive Revenues: MasTec is poised to gain from significant amounts of project awards across multiple segments. As of Dec 31, 2018, the company achieved a record 18-month backlog of $7.7 billion, reflecting an increase of 9% from the comparable prior-year period. This marks the fifth consecutive quarter of record total backlog, depicting significantly strong demand in its end markets for 2019 and beyond. MasTec projects 2019 annual revenues at a record level of $7.6 billion. Revenue growth will primarily be driven by Communications, Transmission and Power Generation segments.
Communication & Power Generation and Industrial Businesses Unlock Significant Opportunities: The need for a 5G roll out in the United States is expected to create significant opportunities for MasTec. The Communications segment will benefit from multi-year demand for tower, small cell and fibre deployments, along with the execution of transformational 5G wireless. Fiber expansion continues to be a major growth driver. A number of customers are aggressively deploying fiber assets and these levels will significantly increase in 2019, with a considerable ramp up in 2020. The company expects strong nationwide fiber deployment projects from both telephone companies and cable TV companies to provide it with significant opportunities over the coming years. The company expects approximately 20% growth in both wireline and wireless markets in 2019.
Meanwhile, driven by the backlog generated from the combination of increased renewable project activity and expansion of services into biomass and other smaller production facilities, the Power Generation & Industrial segment will generate sizable growth. Notably, the segment’s revenues surged 131.7% year over year in the last reported quarter.
Upbeat View: Backed by the above-mentioned growth catalysts, MasTec remains optimistic about 2019 and projects adjusted EBITDA to be $780 million, up from $721 million recorded in 2018. Also, adjusted earnings per share are anticipated to be around $4.34, up 15.1% from the 2018 level.
The company has solid growth prospects, as is evident from the Zacks Consensus Estimate for 2019 and 2020 earnings of $4.36 and $4.92 per share, which reflects growth of 15.7% and 12.9%, respectively, on a year-over-year basis. Overall, it constitutes a great pick in terms of growth investment, supported by a Growth Score of A.
Superior ROE: MasTec’s return on equity (“ROE”) supports its growth potential. The company’s ROE of 20.4% compares favorably with the industry’s average of 10.5%, implying that it is efficient in using its shareholders’ funds.
Other Stocks to Consider
Other top-ranked stocks in the Construction space include Great Lakes Dredge & Dock Corporation GLDD, EMCOR Group, Inc. EME and Tutor Perini Corporation TPC. While Great Lakes Dredge & Dock sports a Zacks Rank #1, the other two stocks carry a Zacks Rank #2.
Great Lakes Dredge & Dock’s 2019 earnings are expected to grow 170.6%.
EMCOR surpassed earnings estimates in all the trailing four quarters, resulting in average positive surprise of 11.6%.
Tutor Perini’s earnings for the current year are expected to increase 27.7%.
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