FBR Capital Reiterates an 'Underperform' on Quanta Services (PWR); Lowering Estimates

FBR Capital reiterates an 'Underperform' on Quanta Services (NYSE: PWR), PT lowered from $20 to $19.

FBR analyst says, "We remain cautious on Street expectations for 2012 given the current backlog and limited visibility into the pipeline business. Also, EPS and EBITDA growth in 2012 will be driven more by margin improvement, which is difficult to have confidence in given the recent quarter. The highlight of 1Q came from the telecom segment where backlog increased significantly on a sequential (+30%) and YOY basis (+60%), albeit from a low base. Regarding the announced share repurchase program, we are unsure why management would buy PWR stock back at 10x 2011 EV/EBITDA when acquisitions in its segments typically trade for 5x–7x and organic growth requires even less of an investment."

"We are lowering our 2011 GAAP EPS estimate to $0.65 (from $0.80) and are lowering our 2011 cash EPS estimate to $0.80 (from $0.96). GAAP EPS guidance for 2011 was lowered to $0.65–$0.80 (from $0.80–$0.90). For 2012 we are lowering our 2012 GAAP EPS estimate to $0.95 (from $1.00) and our cash EPS estimate to $1.07 (from $1.12). Our 2012 estimates assume 12.6% revenue growth, which seems reasonable, and 180 basis points of profit margin improvement, which might be aggressive."

For more ratings news on Quanta Services click here and for the rating history of Quanta Services click here.

Shares of Quanta Services closed at $19.12 yesterday.

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