Shares of Quanta Services Inc. (PWR) reached a 52-week high of $35.55 on Monday, Mar 3, 2014. However, the stock closed at $35.37, representing a one-year return of about 24.6% and a decent year-to-date return of about 13.04%. Average volume of shares traded over the last three months is approximately 1,645,770.
Increase in demand for the company’s Electric Power services, increased revenues in the company’s Natural Gas and Pipeline Infrastructure Services segment driven by shale gas and reasonably strong fourth-quarter results are some of the growth catalysts for the company.
Quanta Services delivered positive earnings surprises in the last four quarters with an average beat of +12.9%. This Zacks Rank #2 (Buy) company has a market cap of $7.69 billion and long-term expected earnings growth rate of 8.00%.
Quanta’s Strengths
Quanta Services is benefiting from increased spending in the Electric Power segment on projects to upgrade and deploy its electric power transmission infrastructure to improve system reliability and deliver renewable electricity from new generation sources to demand centers. Favorable industry legislation is also generating incentives and a positive environment for utilities to invest in their electrical infrastructure, particularly transmission infrastructure.
Quanta Services is one of the largest full-service providers of natural gas and oil pipeline infrastructure services in North America and is well placed to seize opportunities, driven by the development and production of resources from unconventional shale developments and Canadian oil sands.
Development activity for gathering system infrastructure in liquid-rich shale is strong and there are indications that demand for its transmission pipeline services could increase significantly in 2013 and 2014. Attractive growth potential is driven by rehabilitation and replacement services from pipeline integrity initiatives and pursuance of midstream gathering system opportunities in liquid-rich unconventional shale.
Modest 4Q13 Earnings
Quanta Services reported fourth-quarter 2013 non-GAAP earnings (excluding the one-time items) of 50 cents a share, beating the Zacks Consensus Estimate by 22%. However, quarterly earnings were down 2% from the prior-year quarter. Profits were primarily driven by increasing demand for the company’s services.
Revenues for the quarter increased a robust 106.8% year over year to $3.0 billion, driven by healthy revenue growth across all the three legacy business units of the company due to the rising demand for energy infrastructure, especially in the LNG, gas processing and oil and gas markets across the world.
Estimate Revisions
Over the last 7 days, 1 and 2 of the 11 estimates have been revised upward for the current and next quarter, respectively. Similarly, for 2014 and 2015, 1 of 10 and 2 of 9 estimates have been revised upward. Thus, the Zacks Consensus Estimate for the current and next quarter grew 2.7% to 38 cents and 2.3% to 45 cents, respectively.
For fiscal 2014 estimates increased 1.1% to $1.85, while for 2015 estimates were up 1.9% to $2.15 a share.
Conclusion
Quanta is benefiting from the rising demand for power and energy infrastructure worldwide. Projects from around the world have been a major benefactor for the company. The company is positive about winning higher number of orders in its Oil & Gas division, primarily for its mainline pipe construction services.
Other Stocks to Consider
Investors interested in the heavy industries sector can consider AECOM Technology Corp. (ACM), Altra Holdings Inc. (AIMC) and Enersys Inc. (ENS), all of which carry a Zacks Rank #2 (Buy).
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