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Why Shares of MasTec Plunged 17% Today

By Travis Hoium - May 12, 2015 at 12:07PM

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A bad first quarter didn't help, but guidance for the rest of 2015 has this construction company's shares down big today.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What's happening: Shares of construction company MasTec (MTZ 4.50%) dropped as much as 17% today after it announced first-quarter results.

Why it's happening: Revenue grew 4% from a year ago to $1.0 billion, and the company lost $6.9 million, or $0.08 per share. On an adjusted basis, continuing operations generated earnings of $0.07 per share, which was still $0.11 below estimates.  

The first-quarter results were a little disappointing, but second-quarter guidance was even worse. Management said it expects revenue of $1.0 billion and earnings of $0.27 to $0.30 per share, while Wall Street's estimate was for $1.12 billion in revenue and $0.37 in earnings per share. Full-year earnings are expected to be $1.45 per share, well below the $1.76 analysts expected.

Management blamed bad weather and a weak Canadian currency for some of the weak results, and an audit committee investigation is adding costs as well, even delaying the 2014 full-year annual report. But it's also clear that momentum is slowing, as indicated by slow growth, and earnings are definitely headed lower near-term.

Shares are also fairly expensive for a construction company at 11.5 times 2015 guidance, and I'd like to see revenue and profits head higher -- and learn the results of the audit committee investigation -- before thinking shares are ready to recover.

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