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Why Is Quanta Services (PWR) Up 1.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Quanta Services (PWR). Shares have added about 1.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Quanta Services due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Quanta Services Q4 Earnings & Revenues Top Estimates

Quanta Services Inc. ended 2018 on an impressive note, backed by strong base business activity. The company reported fourth-quarter 2018 adjusted earnings of 96 cents per share, surpassing the Zacks Consensus Estimate of 91 cents by 5.5%. Moreover, the reported figure considerably increased 113.3% from 45 cents recorded a year ago. The bottom-line growth is attributable to robust top line and sound execution of its projects.

Total revenues came in at a record level of $3.11 billion, surpassing the consensus mark of $2.95 billion by 5.5%. Also, the top line increased 25.6% year over year, aided by robust revenue growth across the board.

Segment Details

Investors should note that the company has changed the name of Oil and Gas Infrastructure Services segment to Pipeline and Industrial Infrastructure Services, in order to better reflect segmental business operations.

Of the total quarterly revenues, the Electric Power Infrastructure Services segment accounted for 53.3%, and Pipeline and Industrial Infrastructure Services contributed 46.7%.

Revenues from Electric Power Infrastructure came in at $1,659.1 million, up 5.4% year over year. Operating income of $162.2 million was up 4.4% from the year-ago level. However, operating margins declined 10 bps to 9.8%.

Pipeline and Industrial Infrastructure Services segment revenues grew 60.8% from the prior-year quarter to $1,453.1 million. Moreover, operating income of $54.2 million was up 185.3% from the year-ago period. In addition, operating margins of 3.7% were up 160 bps.

Operating Highlights

In the reported quarter, overall operating income came in at $149.4 million compared with the prior-year figure of $53.6 million. Operating margin surged 260 bps from a year ago.

Aggregate total backlog as of Dec 31, 2018 was a record $12.3 billion and 12-month backlog was $7 billion, representing 10.4% and 8.2% growth, respectively.

2018 Highlights

Adjusted earnings came in at $2.81 per share, reflecting an increase of 42.6% from the 2017 level. Revenues were a record $11.17 billion, up 18% from a year ago. Operating margin improved 80 bps to 4.8% during the year.

Liquidity

As of Dec 31, 2018, Quanta Services’ cash and cash equivalents were $78.7 million, down from $138.3 million in the corresponding period of 2017. The company’s long-term debt and notes payable (net of current maturities) amounted to $1,040.5 million, up from $670.7 million as of Dec 31, 2017.

Net cash provided by operating activities in the quarter under review totaled $137.2 million, which was lower than $197.2 million recorded in the year-ago period. In 2018, the metric decreased 3.5% from a year ago to $358.8 million.

Free cash flow was $79.7 million in the quarter (down 37.9% year over year) and $97.7 million during the year (down 35.6% from 2017).

The company bought back more than $451.3 million of its common stock in 2018.

2019 Guidance

Buoyed by strong performance in 2018, the company remains optimistic about 2019 as well, given strengthening of base business activity and ramped-up construction activities in larger pipeline projects.

The company expects adjusted earnings in the range of $3.30-$3.75 per share. Revenues are projected in the range of $10.8-$11.2 billion.

Adjusted EBITDA is expected in the range of $875-$975 million.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 30.66% due to these changes.

VGM Scores

Currently, Quanta Services has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Quanta Services has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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