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Quanta Services (PWR) Q4 Earnings: What’s in the Cards?

Zacks

Quanta Services, Inc. PWR is slated to report fourth-quarter 2016 results before the opening bell on Feb 21.

Last quarter, the company’s earnings came in line with the Zacks Consensus Estimate. However, Quanta Services has had a choppy earnings surprise history; with two misses, one beat and one in-line earnings over the trailing four quarters.

Let's see how things are shaping up for this announcement.

Factors to Consider


Quanta Services has been deriving strong benefits from its diligent three-pronged growth strategy. The strategy focuses on the timely delivery of projects, leveraging on its core business areas to expand in complementary service lines and venturing into new service lines as well. The company’s decentralized and entrepreneurial business model has aided it in combating some of the most pressing macroeconomic challenges.

Quanta Services’ thriving engineering and project management services are expected to boost its revenues for the soon-to-be-reported quarter. Of late, the company has been witnessing a solid rebound in its end markets, on the back of key growth drivers, like an aging grid, shifting generation mix and implementation of clean energy initiatives. Especially, the North American electric transmission and distribution markets have been investing huge amounts in transmission, and distribution upgrades in a bid to improve system reliability and deliver renewable electricity.

Moreover, the company is currently pursuing several high-voltage electric transmission award opportunities, amid substantial bidding activity, in Australia, Canada and the U.S. We believe that these positive industry trends will act as major growth catalysts for the quarter to be reported.

This apart, robust pipeline projects in the oil and gas sector, supported by active bidding and negotiating environment, can also act as huge profit churners for the top line in the fourth quarter. In addition, Quanta Services’ previously completed acquisitions are likely to contribute significantly to the Electric Power Infrastructure Services segment’s top line.

Over the past one year, Quanta Services has recorded an average return of 101.5%, more than double of the Zacks categorized Engineering/R&D Services industry's return of 47.6% over the same time period.

However, Quanta Services has been grappling with adverse weather conditions in recent times. In the last reported quarter, the company’s revenue growth was affected by regulatory delays on some large mainline pipe projects and fluctuations in timing of large projects, as well as losses due to the rainfall associated with Hurricane Matthew. This led the company to lower its full-year 2016 revenue and earnings guidance. Also, unfavorable timing of revenues and corresponding income contributions of certain projects pose a risk to its operational results.

Quanta Services, Inc. Price, Consensus and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that Quanta Services will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 54 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Quanta Services’ Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.

Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Fairmount Santrol Holdings Inc. FMSA has an Earnings ESP of +11.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Milacron Holdings Corp. MCRN has an Earnings ESP of +11.43% and a Zacks Rank #3.

Codexis, Inc. CDXS has an Earnings ESP of +36.4% and a Zacks Rank #3.

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