Quanta Services (PWR) to Post Q2 Earnings: What’s in Store?

Quanta Services, Inc. PWR is slated to release second-quarter 2018 results on Aug 2 before the opening bell.

In the last reported quarter, the company’s earnings came in at 40 cents per share, beating the Zacks Consensus Estimate of 32 cents by 25%. In fact, the company surpassed estimates in three of the past four quarters, resulting in an average positive surprise of 6.66%.

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

Factors at Play

Quanta Services’ decentralized and entrepreneurial business model allows it to combat the challenges that arise from a bleak macroeconomic scenario. Also, Quanta Services enjoys strong prospects in end markets supported by key growth drivers such as an aging grid, shifting generation mix and grid modernization. These factors are expected to prove conducive to the company’s top line, going ahead.

Meanwhile, the company remains optimistic about its solid backlog levels, which are likely to grow further. This apart, its recent bolt-on acquisitions are anticipated to boost top-line growth in the quarter to be reported and beyond.

Segment Discussion

Quanta Services remains optimistic about its end markets’ prospects for both of its segments, namely Electric Power and Oil & Gas segments, over the next couple of years.

In the last reported quarter, the Electric Power Infrastructure Services segment (accounting for 64.9% of the total revenues) performed particularly well, with strong revenue growth (up 28.6% year over year) and margin expansion (up 80 basis points) on the back of outstanding operational execution.

Given strong first-quarter performance, the company had earlier projected second-quarter revenues to be flat to slightly up sequentially for the Electric Power segment. Quanta Services had also projected that third-quarter revenues will likely be the highest in the year, while revenues will be the lowest in the final quarter of 2018.

Margins were projected to be comparable year over year in the to-be-reported quarter. For the third and fourth quarter, margins are expected to grow in double digits.

Meanwhile, the company expects the communications business (included in the Electric Power segment) to perform well and operating margin to improve sequentially. Of late, the company is actively pursuing opportunities related to various U.S. telecom and cable MSOs. With the larger diameter pipeline market expanding and a multi-year cycle ahead of it, the company remains optimistic about its communications infrastructure services operations.

Given this backdrop, the Zacks Consensus Estimate for second-quarter revenues for the segment is pegged at $1,577 million, reflecting growth from $569 million in the last reported quarter.

Meanwhile, Quanta Services’ Oil and Gas Infrastructure Services segment looks equally promising, primarily owing to the improving mainline and natural gas distribution, and integrity markets. The company continues to expect healthy levels of base load work, including supporting midstream infrastructure, downstream support services and natural gas distribution. Additionally, it anticipates strong performance from the pipeline projects, driven by a considerable increase in large pipeline revenue contributions amid an active bidding and negotiating environment.

The Zacks Consensus Estimate for second-quarter revenues for the segment is pegged at $988 million, reflecting 16.4% growth from $849 million in the first quarter of 2018.

Overall, for the second quarter, the Zacks Consensus Estimate for total revenues is pegged at $2.55 billion, implying 15.8% growth. The Zacks Consensus Estimate for earnings is pegged at 61 cents, reflecting a 22% year-over-year increase.

Here is What Our Quantitative Model Predicts:

Quanta Services does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Quanta Services has an Earnings ESP of -2.19%.

Zacks Rank: Currently, the company carries a Zacks Rank #3, which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident about an earnings surprise.

Stocks to Consider

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 quarter to be reported:

Boise Cascade Company BCC has an Earnings ESP of +14.97% and sports a Zacks Rank #1. The company is scheduled to report quarterly numbers on Aug 6.

GCP Applied Technologies Inc. GCP has an Earnings ESP of +2.56% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Aug 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

Altair Engineering Inc. ALTR has an Earnings ESP of +28.57% and also carries a Zacks Rank #3. The company is slated to report quarterly numbers on Aug 13.

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