MasTec Inc. - Value

Infrastructure has become a key component in this recovery as government officials are focusing on it as a means to create jobs and stimulate growth. MasTec Inc. (MTZ) is reaping the benefits as it reported record revenue for the third quarter and raised 2010 guidance all the while still trading at just under 15x forward estimates.

MasTec is in the thick of things as it designs power delivery systems, cable and television networks, fiber optic highways, high-speed Internet, natural gas systems and voice, video and data networks throughout the United States. After a hurricane, MasTec is the company that erects downed utility poles and rebuilds telephone systems.

The company has long-term service and maintenance agreements with companies such as DirecTV, Verizon, AT&T, Progress Energy, and Florida Power & Light.

MasTec Surprised By 25% in the Third Quarter

On Nov 3, MasTec reported its fourth straight earnings surprise and this one was a doozy.

Earnings per share were 35 cents, well ahead of the Zacks Consensus of 28 cents. This was also a 30% increase from the year ago period.

Revenue surged 59% to a record $632 million with organic revenue jumping 39%. The acquisition of Precision Pipeline in the fourth quarter of 2009 was included in the quarter but didn't really ramp up until the quarter ended so didn't have a significant impact on the quarter's numbers.

EBITDA margin in the third quarter climbed 180 basis points to 11.5% from a 9.7% margin last year. It was the company's best quarter as far as margins are concerned, since 2000.

2010 Guidance Raised

Coming off a record quarter, it's not surprising that MasTec raised guidance for the rest of the year.

The company now expects earnings per share of 99 cents compared to 90 cents for 2009. Revenue is expected to be $2.22 billion, up from $1.62 billion in 2009.

The analysts have been moving estimates higher. In the last week, 6 out of 7 revisions for 2010 have been to the upside, pushing the Zacks Consensus to 99 cents from 93 cents. This is in line with the company's guidance.

The 2011 consensus is also on the move higher, jumping 7 cents to $1.17 in the last 7 days. This is earnings growth of 17.5%.

Just Barely a Value Stock

MasTec is on the edge of what I consider "value." Its forward P/E is 14.9, just under the 15 cut-off. So it's not exactly cheap by that metric.

However, the company's price-to-book ratio is within the value parameters at 1.9x and its price-to-sales ratio is also a "value" at 0.6.

MasTec is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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