PWR - Embedded Expectations Analysis - 2021 10 05
Quanta Services, Inc. (PWR:USA) currently trades above recent averages relative to UAFRS-based (Uniform) earnings, with a 23.8x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about credit loss headwinds, higher project costs, and growth opportunities.Specifically, management may have concerns about credit loss headwinds related to the Limetree Refining bankruptcy and higher project costs due to COVID protocols in Canada. Furthermore, they may lack confidence in their ability to meet adjusted full year margin guidance for the electric segment and strategically capitalize on organic and inorganic growth opportunities. Moreover, management may have concerns about the pace of the shift to fiber technology, the sustainability of demand for their transmission interconnects services, and the likelihood of further federal funding for broadband network expansion in underserved markets. In addition, they may be overstating the pace of the recovery of their industrial service business and they may have concerns about the progress of the bipartisan infrastructure package. Finally, management may be overstating the potential for growth opportunities from infrastructure investments in renewable generation, electric vehicles, and data-intensive technologies.
Quanta Services is a provider of contracting services, delivering infrastructure solutions for the electric power, energy and communications industries in the United States, Canada, Australia, Latin America and select other international markets. The company has two segments: Electric Power Infrastructure Services, which provides network solutions to customers in the electric power industry and services that support the development of renewable energy generation; and Pipeline and Industrial Infrastructure Services, which provides infrastructure solutions to customers involved in the development, transportation, distribution, storage and processing of natural gas, oil and other products.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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