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Quanta Services' (PWR) Q3 Earnings Beat Estimates, View Up

Zacks Equity Research

Quanta Services Inc. PWR reported solid results in third-quarter 2019. Both the top and bottom lines surpassed the Zacks Consensus Estimate, and increased year over year. Notably, the stock grew nearly 3% in the pre-market trading session post the earnings release, as the company lifted its 2019 revenues, earnings and adjusted EBITDA guidance.

Quanta Services reported adjusted earnings of $1.14 per share, beating the consensus estimate of $1.04 by 9.6%. Also, the reported figure increased an impressive 29.5% from 88 cents per share recorded in the year-ago period.

The company reported total revenues of $3.35 billion, surpassing the consensus mark of $3.16 billion by 6%. Also, the said metric increased 12% year over year, aided by robust revenue growth across the business.

Quanta Services, Inc. Price, Consensus and EPS Surprise

Quanta Services, Inc. Price, Consensus and EPS Surprise

Quanta Services, Inc. price-consensus-eps-surprise-chart | Quanta Services, Inc. Quote

The year-over-year improvement was mainly driven by its intense focus on base business, long-term programmatic spend of utilities, and development of infrastructure that supports technology deployments such as 5G and electric vehicles. The company believes the above-mentioned factors, acquisitions — which were completed in the third quarter — and construction on the Watay and East West Tie Line transmission projects to support growth in 2020 and beyond.
 
Segment Details

The company reports results under two reportable segments: Electric Power Infrastructure Services segment (accounting for 56%), and Pipeline and Industrial Infrastructure Services (44%).

Revenues from Electric Power Infrastructure Services totaled $1,876.1 million, increasing 16% year over year. However, operating margins contracted 170 basis points (bps) to 9.4%.

Within the Pipeline and Industrial Infrastructure Services segment, revenues grew 8% from the prior-year quarter to $1,476.8 million. Notably, operating margins of 9% also improved 200 bps year over year.

Operating Highlights

Operating income during the reported quarter came in at $209.4 million, up 8.7% from the prior-year figure of $192.6 million. However, operating margin declined 30 bps from a year ago. Adjusted EBITDA of $312.2 million increased 14% from $273.8 million a year ago.

As of Sep 30, 2019, the company reported total backlog of $13.3 billion and 12-month backlog of $7.6 billion. This compares favorably with $12.3 billion of total backlog and $7 billion of 12-month backlog at 2018-end. Also, the reported backlog was up from total backlog of $12.2 billion and 12-month backlog $7.5 billion in second-quarter 2018.

Liquidity

As of Sep 30, 2019, Quanta Services had cash and cash equivalents of $80 million compared with $78.7 million at 2018-end. The company’s long-term debt (net of current maturities) amounted to $1,810.5 million, up from $1,040.5 million as of Dec 31, 2018.

Net cash used in operating activities was $100.2 million versus $221.6 million cash provided by operating activities in the comparable prior-year period. Free cash flow was a negative $283.1 million in the quarter versus a positive free cash flow of $18 million a year ago.

2019 Guidance Raised

Buoyed by increased visibility and sustained higher infrastructure investment across end-markets served, the company lifted 2019 revenue expectation to nearly $12 billion from $11.5-$11.9 billion projected earlier.

The company now expects adjusted earnings between $3.16 and $3.28 per share versus $2.99-$3.33 expected earlier. Notably, it has increased the lower range of its adjusted EBITDA guidance to $904 million versus $852 million projected earlier.

Zacks Rank & Peer Release

Quanta Services — which shares space with AECOM ACM and Jacobs Engineering Group Inc. JEC in the Zacks Engineering - R and D Services industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KBR, Inc. KBR reported strong results in third-quarter 2019. The top and bottom line beat the Zacks Consensus Estimate and improved year over year on continued solid organic growth across the business. Also, the company raised its 2019 guidance.

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