Please ensure Javascript is enabled for purposes of website accessibility

Quanta Putting It Together

By Stephen D. Simpson, Simpson, – Updated Nov 15, 2016 at 6:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This should be just the early stages of a long cycle in utilities.

One quarter at a time, Quanta Services (NYSE:PWR) just keeps coming into better focus. And with utilities moving along the process of improving their transmission and distribution assets from thinking to planning to actually doing, more growth should be on the way.

Revenue for this first quarter rose 33% to more than $496 million. Significantly (or at least it seems significant to me), there was less contribution from storm work in this period than in either the prior quarter or the year-ago period. In other words, the growth we saw here was from actual planned projects. Better revenue filtered through the rest of the income statement, reversing year-ago losses at the operating and net income lines.

This has pretty much always been a utility story, and that's still the case. Revenue from power and gas companies was up 34% and made up two-thirds of the revenue base. As management tells it, not only are utilities starting to put plans into action on transmission and distribution work, but pricing on contracts is also getting better. That's good news for Quanta, and even for rivals InfraSource (NYSE:IFS) and Pike Electric (NYSE:PEC). There's plenty of utility business to go around, but there are also plenty of contractors to bid on that business.

And though I believe that work relating to power transmission and reliability is still the biggest part of the story, it's not the only thing Quanta has going for it. The telecom and cable business is growing pretty well, and it doesn't seem as though customers like Verizon (NYSE:VZ), AT&T (NYSE:T), and TXU (NYSE:TXU) are pulling back from their respective broadband/fiber projects.

With a growing backlog, big-name clients, and a federal mandate to improve power service, I don't think Quanta is close to a peak in its business yet. In fact, this will most likely be a multiyear upswing for the company as a combination of power upgrades, new power projects, growing broadband competition, and potentially more violent weather all play to this company's strengths.

For more related Foolishness:

TXU is a Motley Fool Income Investor recommendation. For more coverage of the market's best dividend-paying stocks, try out Income Investor free for 30 days.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$39.52 (-1.03%) $0.41
AT&T Inc. Stock Quote
AT&T Inc.
T
$16.01 (-1.42%) $0.23
Quanta Services, Inc. Stock Quote
Quanta Services, Inc.
PWR
$128.76 (-5.12%) $-6.95

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.