MasTec Stock Rallies 31% in the Past 6 Months: Is MTZ a Buy Right Now?

MasTec, Inc.'s MTZ stock has gained nearly 31% in the past six months, outperforming the Zacks Building Products - Heavy Construction industry's 24.5% growth, the broader Construction sector's 7.2% increase and the S&P 500 index's 8.6% rise.

This infrastructure construction company is banking on increasing demand for power, data capacity and network speed. Also, MTZ's focus on strategic investments for portfolio diversification positions it well for satiating increased infrastructure demand globally. Moreover, the company is optimistic about its growth opportunities in 2025 and beyond, given the solid pipeline across its businesses and acquisition synergies.

MTZ stock also outpaced its competitors like EMCOR Group, Inc. EME, Quanta Services, Inc. PWR and AECOM ACM, which rallied 18.9%, 10.8% and 6.3%, respectively, in the six-month period.

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Technical indicators are supportive of MTZ's strong performance. As of Thursday, the stock is trading at $110.40, comfortably above its 50-day moving average of $106.62.

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What's Supporting MTZ Stock's Outperformance?

Strong Outlook for 2024: MasTec's robust 18-month backlog of $13.3 billion provides strong visibility into 2024. The company raised its full-year guidance, expecting consolidated revenues of $12.4 billion (prior expected $12.55 billion), up from $12 billion year over year. Adjusted EBITDA is projected to be $975 million, an increase from $860.3 million in 2023, with a margin improvement of 7.9% (up from 7.8% expected earlier and 7.2% reported in 2023).

Adjusted earnings per share are forecasted to be $3.03, up from $1.97 expected earlier. The Clean Energy and Infrastructure segment is expected to increase 10% in 2024, reaching $4.4 billion in revenues, with continued growth anticipated beyond 2024.

Solid Backlog Poses Strength for Future: As of June 30, 2024, MasTec's Clean Energy and Infrastructure backlog increased 10.3% year over year and 4.6% sequentially, with a 1.2x book-to-bill ratio, providing strong visibility into future projects. The Power Delivery segment saw a 12% year-over-year increase and a 20% sequential growth in backlog, highlighted by a major 700-mile high-voltage transmission project starting in 2025. This project, one of the largest in the United States, will generate $300-$500 million annually through 2028, positioning the segment for strong growth.

The Communications segment saw a 1.7% sequential increase and 8.8% year-over-year backlog growth, with revenues expected to rise 4.5% in 2024. Adjusted EBITDA margins remain strong in the high single digits.

The company is optimistic about its growth opportunities. The robust demand for its services suggests the potential for double-digit revenues and earnings growth in 2025 and beyond. Despite short-term pressure in the power delivery segment, the long-term outlook is improving significantly. Meanwhile, the company continues to experience strong demand in both renewables and infrastructure projects. Based on anticipated bookings, it is well-positioned for substantial growth in 2025.

Image Source: MasTec Corporate Presentation

Expanding Communications Pipeline: MasTec has deepened its relationship with AT&T, its largest wireless client, as AT&T expanded the scope and geographic reach of MasTec's core wireless services, in addition to a maintenance contract secured in the third quarter of 2023. This, combined with AT&T's plan to replace Nokia equipment with Ericsson over the next five years, is expected to significantly boost MasTec's wireless business. The impact will start in the second half of 2024, with segment revenues expected to grow by double digits in 2025.

MasTec is positioned for nearly 20% organic revenue growth in the second half of 2024. Additionally, the growing demand for wireline services and the anticipated Broadband Equity, Access, and Deployment (BEAD) program funding provide long-term visibility. New customers, including private equity-backed entrants, are showing strong interest in MasTec's comprehensive solutions, enhancing its growth prospects in 2025 and beyond.

Strategic Acquisitions & Equity Investments: MasTec remains focused on bolt-on acquisitions, completing four in 2023 and five in 2022. Additionally, it holds equity stakes in several telecommunications entities that provide construction services to the company.

As of March 31, 2024, MasTec had $22 million in total investments, including $18 million for FM Tech. It also holds 49% equity interests in entities within its Communications and Power Delivery segments, with a $3 million investment and a 75% equity stake in Confluence Networks, LLC, an undersea fiber-optic systems developer, totaling $2.5 million.

Other Parameters Reflecting MTZ's Solid Growth Prospect

Analysts are showing confidence in the stock, as indicated by recent upward revisions in earnings estimates. Over the last 60 days, forecasts for 2024 and 2025 have increased to $3.02 (from $2.94) and $4.35 (from $4.33), respectively.

The company also has a solid earnings surprise history. Its EPS surpassed the consensus estimate in three of the trailing four quarters and missed on one occasion, with the average surprise being 19.4%. Notably, the company currently has a VGM Score of A, which signifies that MTZ has solid growth prospects and the potential to outperform the market in the near term.

These positive trends signify bullish analysts' sentiments, indicating robust fundamentals and the expectation of continued outperformance in the near term.

Is MasTec a Smart Investment Choice Today?

In the competitive non-residential services sector, MasTec, a leading infrastructure construction company with an $8.75 billion market cap, distinguishes itself. MTZ is strategically situated to capitalize on converging trends, providing multiple paths for near-and-long-term profitable growth. Its diversified portfolio with significant growth potential in all segments makes the stock the best investment option at the moment.

Also, upward revisions in earnings estimates reinforce its Zacks Rank #2 (Buy) rating, making MTZ an attractive addition to investors' portfolios at present.

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