Quanta Services (PWR) Poised to Beat Q3 Earnings: Here's Why

Quanta Services (PWR) Poised to Beat Q3 Earnings: Here's Why

Quanta Services, Inc. PWR is slated to report third-quarter 2017 results before the opening bell on Nov 2.

Quanta Services has had a dismal earnings surprise history, with three misses and one in-line earnings over the trailing four quarters, for an average negative surprise of 4.5%. Last quarter, the company’s earnings missed the Zacks Consensus Estimate by 7.4%.

However, we expect Quanta Services to score an earnings beat in the to-be-reported quarter.

Why a Likely Positive Surprise?

Our proven model shows that Quanta Services has the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Zacks ESP:  Quanta Services has an Earnings ESP of +1.05%, as the Most Accurate estimate of 60 cents is pegged above the Zacks Consensus Estimate of 59 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter .

Zacks Rank:  The company carries a Zacks Rank of 3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors Driving the Better-than-Expected Results

Quanta Services has been deriving sturdy benefits from the company’s diligent three-pronged growth strategy. The strategy focuses on the timely delivery of projects, leveraging on its core business areas to expand in complementary service lines and venturing into new service lines as well.

Quanta Services’ thriving engineering and project management services are anticipated to bolster its revenues for the soon-to-be-reported quarter. Of late, the company has been witnessing a solid rebound in its end markets, on the back of key growth drivers, like an aging grid, shifting generation mix and implementation of clean energy initiatives. These factors will likely boost the segment’s top line.

Moreover, the company is currently pursuing several high-voltage electric transmission award opportunities, amid substantial bidding activity, in Australia, Canada and the United States, which would reflect in the upcoming quarterly results. 

Quanta Services, Inc. Price, Consensus and EPS Surprise

Quanta Services, Inc. Price, Consensus and EPS Surprise | Quanta Services, Inc. Quote

Quanta Services raised its 2017 earnings and revenues guidance last quarter, and we believe its optimism stems from healthy backlog levels, which are anticipated to benefit the results in the to-be-reported quarter. Upbeat industry trends will act as major growth catalysts for the quarter to be reported.

This apart, the company is likely to benefit directly from increasing U.S. production of liquid fuels. Also, Quanta Services wins more construction and engineering contracts as the performance and production levels of the energy sector increase. Robust pipeline projects in the oil and gas sector, supported by active bidding and negotiating environment, can also act as huge profit churners for the top line in the third quarter.

In addition, Quanta Services’ previously completed acquisitions are likely to contribute significantly to the Electric Power Infrastructure Services segment’s top line. Particularly, the recent Stronghold acquisition will drive the company’s revenues with increased penetration in downstream and midstream petrochemical markets, which, in turn, will be beneficial for the quarter under review.

Stocks That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Take-Two Interactive Software, Inc. TTWO , with an Earnings ESP of +5.69% and a Zacks Rank of 1, is expected to release quarterly numbers around Nov 7. You can see the complete list of today’s Zacks #1 Rank stocks here .

Mylan N.V. MYL , with an Earnings ESP of +3.92% and a Zacks Rank of 2, is slated to report results on Nov 6.

Match Group, Inc. MTCH has an Earnings ESP of +4.23% and a Zacks Rank of 2. The company is likely to release earnings around Nov 7.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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