Quanta Services (PWR), despite riding high on a record backlog of projects, might be priced about right for now, analysts say. Low natural gas prices contributed to the malaise, a trend which Quanta management expects to be able to turn around in the coming years.
Quanta Services is a provider of specialty contracting services to the electric power, natural gas and oil pipeline and telecommunications industries in North America and in selected international markets.
The company designs, installs, upgrades, repairs and maintains infrastructure within the industries it serves, such as electric power transmission and distribution networks, substation facilities, renewable energy facilities, natural gas and oil transmission and distribution systems and facilities and wireline and wireless telecommunications networks used for video, data and voice transmission.
It also owns fiber optic telecommunications infrastructure in selected markets and licenses the right to use these point-to-point fiber optic telecommunications facilities to customers, management said in a recent filing.
Consolidated revenues for 2011 were approximately $4.62 billion, of which 66 percent was attributable to the Electric Power Infrastructure Services segment, 22 percent to the Natural Gas and Pipeline Infrastructure Services segment, 10 percent to the Telecommunications Infrastructure Services segment and 2 percent to the Fiber Optic Licensing segment.
“Our Electric Power segment continues to perform well, and we see significant transmission opportunities for the next several years,” Jim O'Neil, Quanta's president and CEO, said in a recent conference call with analysts.
“We also believe our better positioning and indications of an improved operating environment for our Natural Gas and Pipeline segment should produce better results for this segment in 2012 versus 2011, with momentum building in 2013 and 2014. As a result, we believe all of our operating segments will experience an increase in revenues and margins in 2012.”
Quanta Services has a market cap of $4.71 billion in a sector, construction and engineering, where the average company size is $767.62 billion. Its trailing 12-month P/E ratio is 23.98 and its five-year projected price-to-earnings-growth (PEG) ratio is 3, compared to 1.27 for the sector.
Its projected earnings per share growth for the coming year is 26.09 percent, compared to a sector average of 20.44 percent.
Wall Street is generally positive on Quanta Services, with buy or outperform calls from Friedman, Billings, Ramsey & Co., Standard & Poor’s Equity Research, and Piper Jaffray.
Zacks Investment Research analysts recently upgraded the stock to neutral and set a target price of $22.
“The company’s sales increased 37 percent during the year with its backlog reaching a record level at $7.2 billion. The revenue was mainly driven by the electric power segment and the telecom segment. Adjusted earnings per share also witnessed an attractive growth of 78 percent,” they wrote in mid-April.
“However, weak performance by the natural gas and pipeline segment led to a drop in segment revenue and profit.”
Quanta Services next reports on Aug. 2.
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