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Earnings Preview: Quanta Services

Zacks Equity Research

Quanta Services Inc. (PWR) is slated to release fourth-quarter 2011 results on Wednesday, February 22, 2012. The current Zacks Consensus Estimate for fourth-quarter earnings per share (EPS) is 34 cents, representing an annualized growth of 110.83%.  

For 2011, the Zacks Consensus Estimate for earnings per share is 65 cents, reflecting an estimated decline of 14.82%.

Quanta Services’ earnings were ahead of the Zacks Consensus Estimate by 4 cents in the last quarter and by 2 cents in the second quarter of 2011 while it had underperformed in the first quarter of 2011 and was in line in the fourth quarter of 2010, with an average negative surprise of 0.01%.

Third Quarter Highlights

Total revenue for the quarter was $1.25 billion compared with $1.21 billion in the prior-year quarter. The company’s backlog, at $7.2 billion, reached a record in the quarter. The company gained a number electric transmission projects as well as added to its backlog approximately $250 million from large diameter pipeline projects.

Electric Power revenue in the quarter was $822.7 million compared with $532.6 million in the prior-year period. Natural Gas and Pipeline revenue came in at $259.0 million ($551.7 million a year ago), Telecommunications revenue was $140.7 million ($93.6 million last year) and Fiber Optic Licensing revenue was $28.4 million ($28.1 million in the year-earlier quarter).

Agreement of Estimate Revisions  

In the last 30 days, of the analysts providing estimates on the stock, one apiece decreased and increased their estimates for the fourth quarter and full year 2011. One analyst lowered its estimate for full year 2012. None of the analysts revised their estimate for the first quarter 2012.

In the last 7 days, none of the analysts changed their estimate for the fourth quarter 2011, full year 2011, first quarter 2012 or full year 2012.

Magnitude of Estimate Revisions  

In the last 30 days, the earnings estimates for fourth quarter, full year 2011 and first quarter 2012 remained unchanged.  For full year 2012, the consensus estimate decreased from $1.15 to $1.14. In the last 7 days, there was no change in estimate for the fourth quarter, full year 2011, first quarter 2012 or full year 2012.

Our Take

Quanta Services has been witnessing a rise in customer spending as they have started to invest in infrastructure with the improving economic environment, leading the company to believe that it has overcome the worst phase of the recession. The company expects to benefit significantly from the ongoing bidding processes in its Natural Gas and Pipeline segment, leading to a continuous increase in the segment’s backlog.

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. Quanta reports its results under four reportable segments: (1) Electric Power Infrastructure Services, (2) Natural Gas and Pipeline Infrastructure Services, (3) Telecommunications Infrastructure Services and (4) Fiber Optic Licensing. 

We maintain a Neutral rating on Quanta Services for the long term. The stock retains a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

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