Will MasTec Bounce Back From Its Latest Setback?

Energy pipeline construction. Source: MasTec.

A healthy infrastructure is a key component of any thriving economy, and the U.S. has its share of infrastructure challenges that the right companies can profit from. Infrastructure construction company MasTec (MTZ 2.53%) has built its reputation on providing engineering, installation, maintenance, and upgrade services for infrastructure projects of all kinds, ranging from fiber-optic cable installation for telecommunications clients to pipelines, electrical transmission lines, and heavy industrial plants for its energy, utility, and industrial customers. Yet as MasTec prepares to release its fourth-quarter financial report on Thursday afternoon, investors are nervous about whether the company's energy-related segments will weigh on growth, due to the recent plunge in crude oil prices. Let's take an early look at MasTec and what those who follow the stock are looking to see from its results and in its immediate future.

Stats on MasTec

Source: Yahoo! Finance.

Will MasTec stop building earnings growth?
In recent months, investors have gotten more pessimistic about their views on MasTec earnings, cutting their full-year 2015 projections by 10%. The stock has also suffered greatly, falling 18% just since mid-November.

Source: MasTec.

Much of the drop in MasTec's stock came after the company reduced its 2015 guidance back in December. MasTec said that one of its major customers had said that it expects lower levels of wireless project activity, which most analysts interpreted to refer to AT&T, which had previously announced reduced capital expenditures for 2015. In addition, MasTec expressed some concerns about the prospects for its oil and gas segment, despite the fact that at that time, none of its pipeline or energy facilities projects had gotten cancelled or delayed. As a result, the company said it expected 9% revenue growth, down from previous growth estimates of 13%-17%, with adjusted earnings coming in at $1.87 per share rather than the $2-$2.15 per share range it had expected previously. MasTec didn't make any adjustments to its fourth-quarter projections, but even so, the announcement marked the end of a terrible week for MasTec in which the stock dropped about 20%.

The irony of the situation is that MasTec had made so much progress diversifying away from its previous emphasis on telecom infrastructure. Last quarter, MasTec marked a milestone in reporting revenue from oil and gas that exceeded its communications-segment sales, with the proportion of overall revenue coming from oil and gas having doubled in just the past two years or so. Historically, MasTec's partnership with DirecTV to install satellite systems left it heavily exposed to DirecTV's prospects, but now, MasTec finds itself subject to the uncertainties in the energy industry.

Source: MasTec.

Even so, MasTec has plenty of solid prospects throughout its four major segments. The company is supporting wireless infrastructure improvements in Mexico and elsewhere, and pipeline projects in Canada are likely to proceed despite oil-price pressures. Moreover, with major needs for improvements to the U.S. electrical grid and related power-generation needs, MasTec won't see all of its potential growth areas disappear even if the energy markets struggle throughout 2015.

In the MasTec report, watch for the latest signs of whether any of the company's clients have sought to cancel or delay their infrastructure projects, especially in the energy space. If oil prices remain low, then it could make some energy infrastructure improvements less economically viable, and that could have an impact on MasTec's surging oil and gas business. In contrast, if MasTec can retain its growth trajectory despite falling levels of capital expenditures throughout the energy industry, then 2015 could be a far better year for it than investors currently expect. With shares at such depressed levels, any upside surprise from MasTec could easily send the stock soaring back toward its past highs.