Quanta Services Inc.(PWR) reported second-quarter 2014 non-GAAP earnings (excluding one-time items) of 40 cents a share, beating the Zacks Consensus Estimate of 39 cents a share by 2.6%. Earnings also improved 5.3% from the prior-year quarter’s earnings of 38 cents. However, the company’s GAAP earnings per share came in at 37 cents, up 12.1% year on year. Shares of the company were up 1.3% following the earnings results.
The company benefited from its leading position in the energy infrastructure market. Despite headwinds like inclement weather conditions, the company’s diligent operational execution led to the upside.
Revenues
Total revenue in the quarter stood at $1.86 billion, up a robust 26.5% from $1.47 billion in the prior-year quarter. Revenues fell short of the Zacks Consensus Estimate of $2.03 billion.
Segment Details
Electric Power revenues in the quarter stood at $1.24 billion, up 18.4% from $1.05 billion in the prior-year quarter. The Electric Power segment continued to experience increased demand for electric transmission and distribution services, despite reduced spending in the industry. The increased demand can be attributed to consistent upgrades and strengthening of distribution networks by companies to brave harsh weather conditions. The business also benefited from the improvement in the residential and infrastructure industry.
The Oil and Gas Infrastructure segment reported revenues of $585.4 million, reflecting a 51.7% year-over-year increase. This growth was driven by increased revenues from projects related to unconventional shale developments in certain regions of North America including Canada and coal seam gas in Australia. Moreover, growing investments in the midstream infrastructure is also benefiting the company. Quanta’s pipeline-gathering activities remain on track and the company has been experiencing increased demand for its mainline pipe construction services over the last few quarters.
Fiber Optic Licensing revenues declined 4.9% to $40.0 million from $42.1 million in the comparable quarter last year. The decline was primarily led by a fall in telecom service revenues. However, management has taken initiatives to make a turnaround in the business. As part of these initiatives, the company has begun the deployment of its new services that are expected to benefit the business significantly over the long haul. Consequently, the deployment costs along with dark fiber network maintenance expenses proved to be a drag on the segment’s revenues this quarter.
Income and Expenses
Operating income in the quarter stood at $133.4 million compared with $117.2 million in the prior-year quarter, reflecting an increase of 13.8%. Selling, general and administrative expenses (SG&A) totaled $139.4 million as against $119 million in the comparable quarter last year.
Cash Flow and Balance Sheet
Exiting the quarter, cash and cash equivalents were $189 million while shareholders’ equity stood at $4.4 billion. Long-term debt was $4.1 billion.
During the second quarter, Quanta repurchased approximately 1.3 million shares for $45 million.
Acquisitions
Year to date, Quanta completed eleven (6 in the first quarter and 5 in the second) acquisitions.
Outlook
Encouraged by the impressive second-quarter performance, the company provided guidance for the third quarter and raised its guidance for fiscal 2014.
Quanta expects revenues in third-quarter 2014 in the range of $2.0–$2.1 billion and non-GAAP earnings per share in the band of 57–59 cents.
Also, revenues for full-year 2014 are projected between $7.6 billion and $7.8 billion, highlighting a raise from the previous range of $7.4–$7.8 billion. Non-GAAP earnings per share for the year are expected in the range of $1.90 to $2.00 compared with $1.85 to $2.05 mentioned earlier.
Quanta currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include China Merchants (CMHHY), CLARCOR Inc. (CLC) and Federal Signal Corp. (FSS). All three carry a Zacks Rank #2 (Buy).
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