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MasTec (MTZ) to Acquire Henkels, Expand Market Presence

MasTec (MTZ) to expand in the fast-growing electric utility services market with the buyout of Henkels.

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This story originally appeared on Zacks

MasTec, Inc. MTZ has inked a deal to acquire a leading U.S. private electrical power transmission and distribution utility services firm — Henkels & McCoy Group Inc. (Henkels). The transaction is valued at $600 million, with approximately $420 million in cash and nearly 2 million shares of MasTec’s common stock, subject to customary purchase price adjustments.

The deal is likely to close by 2021-end, subject to receiving the required Hart-Scott-Rodino approvals and the satisfaction of other customary closing conditions. MasTec projects post-acquisition leverage metrics to remain within the targeted range and ample liquidity.

Henkels is the 14th largest U.S. specialty contractor according to the recent 2021 Engineering News-Record ranking. Founded in 1923, the company has generated approximately $1.5 billion revenues in fiscal 2021, primarily owing to long-tenured relationships across a diverse blue chip customer base, with expansive geographic operations across the United States.

The acquisition is in line with its long-term strategy of expanding in the fast-growing electric utility services market on the back of incremental recurring master service agreement revenues. Henkels is likely to register comparable results in fiscal 2022 as well. In fiscal 2021, it reported approximately $1.5 billion of revenues and $70 million of adjusted EBITDA. Both fiscal 2021 and expected post-acquisition 2022 results reflect impacts of underperforming communications and pipeline services operations, which are anticipated to improve gradually.

Jose Mas, MasTec's chief executive officer, stated, "Henkels' operating excellence is well known in the industry, and together with MasTec, our expanded resources and footprint will help serve expected significant growth demand in the utility sector.” He continued, “We believe that Henkels' expertise, scale and capacity, when combined with our existing operations, will provide a compelling suite of service offerings to support our customers' needs as they work to transition to renewable energy generation, modernize power grid systems and reduce carbon emissions."

- Zacks

Share Price Performance

Shares of MasTec have gained 28.6% so far this year, outperforming the Zacks Building Products - Heavy Construction industry’s 20.5% rally. Despite uncertain market conditions, its performance in 2021 is expected to grow year over year, given a strong backlog and accelerating growth potential, especially across communications, transmission, and power generation as well as renewable portfolios.

Zacks Investment ResearchImage Source: Zacks Investment Research

The company has been making the most of the country’s diligent focus on carbon neutrality. Furthermore, MTZ’s substantial presence in the telecommunications market and recent expansion into heavy infrastructure will prove conducive to its growth profile.

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.

Zacks Rank

MasTec currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some Better-Ranked Stocks in the Construction Sector

Sterling Construction Company, Inc. STRL: Headquartered in The Woodlands, TX, this company is engaged in heavy civil construction, specialty services and residential construction activities. It is currently reaping benefits from the transformed business portfolio and overall project mix toward higher value, lower risk, and more profitable work. Its diverse portfolio of end customers and geographies, coupled with the strength of end-markets served, has been driving growth despite headwinds from inflation and the supply chain.

Sterling currently carries a Zacks Rank #1 and has gained 29.1% in the past year. Earnings for 2021 are expected to grow 41.5%.

EMCOR Group, Inc. EME: Headquartered in Norwalk, CT, this company provides electrical and mechanical construction and facilities services in the United States. EMCOR has been benefiting from solid execution in the U.S. Construction segment — comprising the U.S. Mechanical and Electrical Construction units — as well as disciplined cost control amid the COVID-19 pandemic. Also, accretive buyouts have been strengthening its overall results by adding new markets, opportunities and capabilities.

EMCOR, currently carrying a Zacks Rank #2, has gained 32% in the past year. Earnings for 2021 are expected to grow 10.6%.

Weyerhaeuser Company WY is one of the leading U.S. forest product companies. The company has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.

Weyerhaeuser’s earnings estimates for the current fiscal year have increased 0.9% over the past seven days. Shares of the company have jumped 18.1% in the past year.





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