This engineering and construction firm is expected to grow by 22.1% next year. Earnings come out today!
Quanta Services, Inc. (PWR)
From Cabot Undervalued Stocks Advisor
Quanta Services is a leading specialty infrastructure solutions provider serving the utility, energy, and communication industries. The company’s infrastructure projects have meaningful exposure to highly predictable, largely non-discretionary spending across multiple end-markets, with 65% of revenues coming from regulated electric, gas, and other utility companies. Quanta achieved record annual revenues, operating income, and backlog in 2019, and is pursuing a multi-year goal of increasing margins. Dividend payouts and share repurchase activity have continued uninterrupted during the pandemic.
We view this company as high-quality, well-run, and resilient. The market views PWR shares as a safe haven in an unpredictable market and economy, helping the shares to fully recover from their March 2020 lows. The new 15-year contract to operate and modernize Puerto Rico’s energy grid is an encouraging positive as the company is seeking to shift toward a capital-light, recurring profit model.
Quanta confirmed that it will report earnings on Thursday, August 6. The consensus estimate remains at $0.47/share. For the full year, analysts estimate that Quanta’s earnings per share will dip about 5% in 2020 to $3.16, due to disruption costs related to the pandemic, then rebound over 22% to $3.86 in 2021.
PWR shares rose fractionally over the past week. On 2021 estimated earnings, the P/E is a reasonable 10.6x. Traders may consider exiting near 43. For long-term holders, Quanta stock looks well-positioned to continue to prosper. New investors should establish a starter position now and look to add on weakness. Buy.
Bruce Kaser, Cabot Undervalued Stocks Advisor,cabotwealth.com, 978-745-5532, July 29, 2020