Focus on Clean Energy Aids MasTec (MTZ) Amid Challenges
MasTec (MTZ) gains from the country's clean energy drive and acquisitions. Yet, volatility in the energy market remains a risk.
MasTec, Inc. MTZ is making the most of the country’s diligent focus on carbon neutrality. Furthermore, the company’s substantial presence in the telecommunications market and recent expansion into heavy infrastructure will prove conducive to its growth profile.
So far this year, shares of this leading infrastructure construction company have gained 30.5%, outperforming the Zacks Building Products - Heavy Construction industry’s 23.6% rally. The outperformance can primarily be attributable to solid earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in the trailing 23 quarters. Earnings estimates for 2021 have moved up 0.7% over the past 30 days.
Yet, COVID-related disruptions and volatility in the energy market remain potent headwinds.
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Let’s delve deeper into major growth drivers of this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Focus on Carbon Neutrality
President Joe Biden remains keen on enhancing research and development as well as technologies, including large-scale battery power storage and carbon capture and minimization, and modernizing infrastructure, comprising the nation’s electricity grid and a nationwide network of public charging stations for EVs. Now, with strong visibility into the clean energy market, MasTec remains well poised for growth, given persistent focus on the clean energy market including wind, solar, biofuels, hydrogen and storage. Second quarter-end backlog at the Clean Energy and Infrastructure segment improved $320 million sequentially. As one of the largest clean energy contractors in the country, MasTec’s expertise in constructing wind farms, solar farms, biomass facilities, high-voltage transmission lines, substations, battery storage and hydrogen-enabled solutions uniquely position the company to take advantage of the growth in this market. It continues to see strong demand for renewables, with significant improvement in solar activity and distributed generation.
Major Foothold in Telecommunications
The Communications segment continues to offer attractive upside opportunities, driven by 5G investment and accelerating spending by DISH as well as T-Mobile. Also, the Rural Digital Opportunity Fund, or RDOF — which is a follow-up to the Connect America Fund — will provide $20 billion of funding over the next 10 years to build and connect gigabit broadband speeds in underserved rural areas. Second quarter-end backlog at the segment improved $489 million sequentially and it expects growth for the current year to be driven by persistent expansion of fiber optic networks, investments in wireless network capacity and 5G-related work.
MasTec has a penchant for acquisitions and strategic alliances for bolstering inorganic growth and expanding market share. During the first six months of 2021, MasTec made seven acquisitions: a premier specialty utility contractor primarily providing electrical distribution network services; a heavy civil infrastructure construction company focusing on transportation projects; a heavy industrial general contractor with concrete, piping and electrical capabilities; a telecommunications and utility technical services company; a telecommunications and cable services provider; a utilities infrastructure company; along with a pipeline contractor.
Although MasTec has enough visibility throughout 2021, the biggest risks to its guidance are governmental permitting, crew social distancing mitigation and the impact they may have on project schedules along with any potential project delays.
The company now expects to generate record revenues of $8.1 billion in 2021, down from previous projection of $8.2 billion. The decrease in the annual revenue expectation was primarily due to some project activity slippage to 2022 in communications and clean energy.
Some better-ranked stocks in the same industry include Granite Construction Incorporated GVA, Sterling Construction Company Inc. STRL and Tutor Perini Corporation TPC. While Granite Construction sports a Zacks Rank #1, the other two stocks carry a Zacks Rank #2 (Buy).
Granite Construction and Sterling earnings for 2021 are expected to rise 40% and 30.3%, respectively.
Tutor Perini has a solid earnings surprise history, surpassing the consensus mark in all of the trailing four quarters, with the average being 17.3%.
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