Quanta Services, Inc.

PWR Details

Quanta Services, Inc. (NYSE: PWR) is a contracting services company offering infrastructure solutions for the electric power, energy, and communications industries, comprising design, installation, repair and maintenance.

Results Performance for the Third Quarter Ended 30 September 2021 – (Q3FY21)

• The revenue stood at $3.35 billion in Q3FY21 versus $3.02 billion in Q3FY20, mainly driven by Electric Power Infrastructure Solutions segment revenue that stood at $2,328 million in Q3FY21, up 10% YoY.
• Underground Utility & Infrastructure Solutions segment revenue stood at $1,025 million in Q3FY21, up 12% YoY.
• The net income attributable to common stock stood at $174.4 million, or $1.21 per diluted share, in Q3FY21 versus $162.9 million, or $1.13 per diluted share, in Q3FY20.
• The total backlog stood at $17.0 billion, and a 12-month backlog of $9.8 billion represent record levels.

Source: Company Reports, Analysis by Kalkine Group

Key Update

• On 27 January 2022, the company stated that its Board of Directors had named Redgie Probst as its Chief Operating Officer (COO).

Outlook

The long-term outlook for the company is optimistic. The company expects full-year revenues from legacy operations to be in the ambit of $12.15-$12.35 billion. Further, it expects the electric segment to generate revenue in the purview of $8.7-$8.8 billion and operating margins are expected to be slightly above 11%. The Underground Utility and Infrastructure Solutions segment is expected to generate revenue in the ambit of $3.45-$3.55 billion and margins between 4.5-5%. The company acquired three businesses and closed a minority investment in another business for ~$110 million. These investments are anticipated to generate revenues between $400-$500 million and adjusted EBITDA between $40-$60 million.

Key Risks

The company is exposed to weather, regulatory, permitting, project timing, execution challenges and other factors that have impacted its historical results, and could impact its future financial results. Multiple factors could affect the timing or profitability of projects, which could push costs upward, fall or delays in revenues, the payment of liquidated damages or project termination.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The company has delivered a 6-month and 1-year return of ~+10.55% and ~+39.78%, respectively. In addition, the stock is trading lower than the average of the 52-week high price of $124.69 and the 52-week low price of $70.465.

The stock has been valued using EV/Sales multiple based relative valuation (on an illustrative basis). The target price so arrived reflects a potential rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering a solid financial outlook for revenues, margins, and earnings for FY21.

Considering the factors above and the current trading levels we give a “Buy” rating on the stock at the closing market price of $98.50 per share, up 1.66% as of 28^th January 2022.

Quanta Services, Inc. (PWR) is a part of Kalkine’s Global Green Energy Product

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.