Will Quanta Services (PWR) Bounce Back for Q1 Earnings?

Quanta Services Inc. PWR is slated to report first-quarter 2015 results on Apr 30.

Last quarter, the company posted a negative earnings surprise of 2.04%. Prior to this, Quanta Services posted a positive surprise of 4.65% over four consecutive quarters.

Let's see how things are shaping up for this announcement.

Factors to Consider

Quanta Services won a couple of contracts over the last three months. In March, the company disclosed that it has been chosen by an operating arm of SemGroup Corp. for providing overall engineering, procurement & construction (‘EPC’) solutions for the Maurepas Pipelines Project in Louisiana (read more: Quanta to Provide EPC Services to Maurepas Pipelines Project).

Moreover, in February, one of Quanta Services’ subsidiaries was selected by Enbridge Energy, Limited Partnership for the Line 78 Pipeline Project. The scope of work includes the construction and installation of around 79 miles of new crude oil mainline pipe that will begin at Enbridge's Flanagan Terminal near Pontiac, IL, and stretch to Enbridge's terminal near Griffith, IN. Moreover, the company’s operating arm will build and install the pumping station for Line 78 at the Flanagan Terminal along with modifying the Griffith terminal.

However, the current volatility in the oil and gas market, with oversupply continuing to pressure the prices and spending levels, is anticipated to affect Quanta Services’ projects and orders. The company expects the declining oil prices to negatively affect its financials, if prices hover around the bottom for an extended period.

Also, Quanta Services is facing midstream gathering and mainline infrastructure bottlenecks in North America, even at the time of smooth oil and gas market scenario. This may hurt the company’s bottom-line growth in the coming quarters.

Earnings Whispers?

Our proven model does not conclusively show that Quanta Services will beat earnings this season. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 38 cents. Hence, the difference is 0.00%.

Zacks Rank: Quanta Services’ Zacks Rank #3 (Hold) when combined with 0.00% Earnings ESP makes surprise prediction difficult.

Notably, we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies that investors may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

American Eagle Outfitters AEO, Earnings ESP of +18.18% and Zacks Rank #2.

AXIS Capital Holdings Ltd. AXS, Earnings ESP of +13.56% and a Zacks Rank #1.

Fluor Corp. FLR, Earnings ESP of +4.08% and a Zacks Rank #3.

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