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What's in the Cards for Quanta Services' (PWR) Q1 Earnings?

Zacks Equity Research

Quanta Services, Inc. PWR is scheduled to report first-quarter 2019 results on May 2, before the opening bell. In the last reported quarter, the company’s adjusted earnings of 96 cents per share and revenues of $3.11 billion topped the Zacks Consensus Estimate by 5.5% each.

Notably, the top and bottom lines increased 25.6% and 113.3%, respectively, on a year-over-year basis, aided by robust revenue growth across the board.

Which Way Are Estimates Trending?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

Quanta Services, Inc. Price and EPS Surprise

Quanta Services, Inc. Price and EPS Surprise | Quanta Services, Inc. Quote

 

The Zacks Consensus Estimate for the quarter to be reported is currently pegged at 86 cents per share, indicating 115% year-over-year growth. Total revenues are expected to be $2.61 billion, suggesting a 8.1% increase from the year-ago reported figure.

Factors at Play

Strong base business activity and ramped-up construction activities in larger pipeline projects are expected to drive Quanta Services’ performance in the first quarter.

Its solid backlog levels in end-markets served, three-pronged growth strategy focusing on timely delivery of projects to exceed customer expectation, leverage on core business to expand in complementary adjacent service lines and ongoing momentum of exploring new service lines are anticipated to help the company to post solid first-quarter results.

This apart, the company’s acquisitions strategy is likely to boost market share and develop incremental backlog, thereby increasing its top line in the to-be-reported quarter.

Segment Discussion

Optimism surrounding end markets in both its segments, namely Electric Power and Oil & Gas, is likely to aid Quanta Services to post improved results in the to-be-reported quarter as well as over the next couple of years.

The company’s Electric Power Infrastructure Services segment has been performing pretty well over the last few quarters, courtesy of modest revenue growth and solid margin expansion, backed by solid execution of a large transmission project. The trend is expected to continue in the first quarter as well.

The segment’s communications operations are anticipated to post higher revenues and operating margins in the to-be-reported quarter. Prospects of the segment remain robust, given customers’ investment in grid modernization programs to accommodate a changing fuel generation mix toward natural gas and renewables, intended to address the aging infrastructure, strengthen systems for resiliency against extreme weather conditions and support long-term economic growth.

Given this backdrop, the Zacks Consensus Estimate for the segment’s first-quarter revenues is pegged at $1,660 million, implying growth from $1,569 million in the last reported quarter.

Meanwhile, Quanta Services’ Oil and Gas Infrastructure Services segment looks equally promising in terms of its growth prospects. This is primarily owing to improving mainline and natural gas distribution, and integrity markets. The company expects healthy levels of base load work, including supporting midstream infrastructure, downstream support services and natural gas distribution, to boost profitability in the first quarter.

Sales and margins are expected to improve in the first quarter, aided by the above-mentioned tailwinds, and ongoing improvement in gas distribution and base business.

The Zacks Consensus Estimate for the segment’s first-quarter revenues is currently pegged at $976 million, indicating an improvement from $849 million in the year-ago period.

What the Zacks Model Says

Our proven model does not conclusively show that Quanta Services is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, the company carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meanwhile, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks with Favorable Combination

Here are some construction companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +5.50% and a Zacks Rank #1.

Apergy Corp. APY has an Earnings ESP of +0.81% and a Zacks Rank #1.

Louisiana-Pacific Corp. LPX has an Earnings ESP of +62.50% and a Zacks Rank #3.

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