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MasTec (MTZ) Up 4.2% on Q2 Earnings Beat, Updates Guidance

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MasTec, Inc. MTZ reported impressive results for second-quarter 2020 wherein both the top and the bottom line surpassed the Zacks Consensus Estimate. Also, its adjusted earnings exceeded management’s expectations on the back of solid segmental performances (barring Oil and Gas).

Shares of this leading infrastructure construction company grew 4.2% in after-hours trading on Jul 30 following its release of better-than-expected results.

George Pita, MasTec's executive vice president and chief financial officer, said: “We continue to monitor current conditions and prudently manage our cash flow and liquidity, and our strong first half 2020 cash flow performance supports our expectations that annual 2020 cash flow from operations will reach new record levels, further strengthening our capital structure, liquidity levels and leverage profile."

Inside the Headlines

During the quarter, MasTec reported adjusted earnings per share of 95 cents, which surpassed the Zacks Consensus Estimate of 80 cents by 18.8% and also outpaced the upper end of its expectation of 89 cents by 6.7%. However, the metric fell 42.4% on a year-over-year basis from $1.65 per share.

MasTec, Inc. Price, Consensus and EPS Surprise

MasTec, Inc. Price, Consensus and EPS Surprise
MasTec, Inc. Price, Consensus and EPS Surprise

MasTec, Inc. price-consensus-eps-surprise-chart | MasTec, Inc. Quote

Revenues of $1.57 billion topped the consensus mark of $1.54 billion by 1.8% but decreased 6.7% year over year.

At the end of the reported quarter, the company had an 18-month backlog of $8.2 billion, up 5.1% from the last-year level.

Segment Update

Revenues from Communications inched up 0.3% year over year to $654.3 million. Adjusted EBITDA margin also rose 370 basis points (bps) to 11.7%.

Electrical Transmission segment’s revenues came in at $124.1 million, up 23.6% from the year-ago quarter. Adjusted EBITDA margin came in at a negative 2.6% against 8.6% reported in the year-ago period.

Clean Energy and Infrastructure’s (primarily known as Power Generation and Industrial) revenues surged a notable 70.3% year over year to $426.1 million. Adjusted EBITDA margin of 7.1% more than doubled the year-ago figure.

Revenues from the Oil and Gas segment plunged 60.7% from the year-ago number to $368.5 million. Nonetheless, adjusted EBITDA margin improved an impressive 260 bps to 21.7%.

Operational Update

General and administrative expenses, as a percentage of revenues, increased 180 bps from the prior-year quarter to 5.4%. The company reported adjusted EBITDA of $165.7 million, down 31.2% from the prior-year period. Adjusted EBITDA margin also contracted 180 bps to 10.6%.

Financial Details

As of Jun 30, 2020, MasTec had cash and cash equivalents of $48.6 million compared with $71.4 million at 2019-end. The company provided $496.5 million of cash from operating activities in the first half of 2020 compared with $351.5 million in the comparable period a year ago.

2020 Guidance

MasTec noted that most of its construction services are deemed essential under the state and local pandemic mitigation orders. It anticipates the business to be persistently impacted by the COVID-19 outbreak in the remaining quarters of 2020. The company may witness lost productivity from governmental permitting delays, reduced crew productivity due to social distancing, lower levels of overhead cost absorption and a delay or shutdown of projects.

Based on these headwinds, MasTec expects to generate revenues worth approximately $7 billion in the ongoing year, down from $7.3-$7.7 billion projected earlier. This reduced projection mainly stemmed from lower-than-expected third and fourth quarter Oil & Gas segment’s revenues. Notably, the company has been witnessing regulatory deferments of two large projects, which are expected to hit the project activity.

Adjusted EBITDA is expected to be $800 million compared with $775-$825 million expected earlier. This, however, indicates a decline from the adjusted EBITDA of $843.2 million reported in 2019. Adjusted EBITDA margin is likely to be 11.4% compared with 10.6-10.7% predicted earlier, indicating a 11.7% deterioration from the prior-year recorded figure. Adjusted earnings are anticipated to be $4.93 per share (compared with $4.50-$5 envisioned earlier). Adjusted earnings in 2019 were $5.46 per share.

Third-Quarter View

MasTec forecasts revenues of $1.9 billion, indicating a decrease from $2.02 billion registered a year ago. Adjusted EBITDA is estimated to be $254 million with margin projection of 3.4%. Adjusted EBITDA in the year-ago period was $252.1 million, with a margin of 12.5%. Adjusted earnings per share are assumed to be $1.67, suggesting a significant decline from the year-ago reported figure of $1.73.

Zacks Rank

MasTec, which shares space with EMCOR Group, Inc. EME, Dycom Industries Inc. DY and Great Lakes Dredge & Dock Corporation GLDD in the Zacks Building Products - Heavy Construction industry, currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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