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MasTec (MTZ) Up 25.5% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for MasTec (MTZ). Shares have added about 25.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MasTec due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

MasTec (MTZ) Q2 Earnings Top Estimates, View Up

MasTec, Inc. came up with better-than-expected results in second-quarter 2019. It also lifted its view for 2019.

MasTec reported adjusted earnings per share (EPS) of $1.60, surpassing the Zacks Consensus Estimate of $1.12 by an impressive 42.9%. Also, the reported figure exceeded the company’s expectation by 49 cents and increased an impressive 54% from the prior-year figure of $1.04.

Revenues of $1,939 million topped the consensus mark of $1,809 million by 7.2%. The reported figure also increased 19.9% on a year-over-year basis, primarily driven by higher contribution from Power Generation and Industrial, Electrical Transmission, as well as Oil and Gas businesses.

Its 18-month backlog as of Jun 30, 2019 was a record $7.8 billion, up $51 million from the corresponding period of last year.

Segment Update

Revenues from Communications improved 5.5% year over year to $652.6 million. Adjusted EBITDA margin, however, contracted 380 basis points (bps) to 8%.

The Electrical Transmission segment’s revenues came in at $100.4 million, up 18.8% from the year-ago quarter. Adjusted EBITDA margin came in at 8.6% versus negative margin of 3.2% a year ago.

Power Generation and Industrial’s revenues surged 71.4% year over year to $250.2 million. However, adjusted EBITDA margin fell 320 bps from the prior-year quarter to 3.5%.

Revenues from the Oil and Gas segment increased 21.8% from a year ago to $936.8 million. In addition, adjusted EBITDA margin improved an impressive 320 bps to 19.1%.

Operational Update

General and administrative expenses rose 4.8% from the prior-year quarter to $70.8 million. The company’s adjusted EBITDA came in at $240.7 million in the reported quarter, up 26% from $191.1 million in the prior-year period. Adjusted EBITDA margin also surged 60 bps to 12.4%.

Financial Details

MasTec reported cash and cash equivalents of $59.2 million as of Jun 30, 2019 compared with $27.4 million at 2018-end. Long-term debt was $1.25 billion as of Jun 30, 2019 compared with $1.32 billion on Dec 31, 2018.

The company provided $351.5 million of cash from operating activities in the first six months of 2019 compared with $23.2 million in the comparable year-ago period.

2019 Guidance Lifted

Full-Year 2019

MasTec upwardly revised revenue expectation to roughly $7.7 billion from prior projection of $7.6 billion. Adjusted EBITDA is now projected at $836 million versus $795 million expected earlier, with adjusted EBITDA margin of 10.9%. Adjusted earnings per share are now anticipated at around $5.04 ($3.77 in 2018) versus $4.55 expected earlier.

Third-Quarter 2019

For the quarter, MasTec expects revenues to be $2.15 billion. Adjusted EBITDA is expected to be $246 million, with margin of 11.4%. Adjusted earnings per share are anticipated at $1.62, indicating growth from $1.33 reported in 2018.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 12.35% due to these changes.

VGM Scores

Currently, MasTec has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise MasTec has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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