Quanta Services Earnings Cheat Sheet: Higher Expenses Shrinks Margins, Profit Declines

Rising costs hurt S&P 500 (NYSE:SPY) component Quanta Services Inc. (NYSE:PWR) in the second quarter as profit dropped from a year earlier. Quanta Services, Inc. provides infrastructure and contracting solutions to the electric power, natural gas, oil and telecommunications industries.

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Quanta Services Earnings Cheat Sheet for the Second Quarter

Results: Net income for the general contractors company fell to $31.8 million (15 cents per share) vs. $33 million (16 cents per share) a year earlier. This is a decline of 3.6% from the year earlier quarter.

Revenue: Rose 16.1% to $1.01 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: PWR reported adjusted net income of 19 cents per share. By that measure, the company beat the mean estimate of 15 cents per share. It beat the average revenue estimate of $955.1 million.

Quoting Management: “We believe Quanta is on the verge of a significant growth cycle, as evidenced by the 32percent organic revenue growth in our electric power segment, as well as a 19.3percent increase in the company’s twelve-month backlog since June 30, 2010,” said Jim O’Neil, president and chief executive officer of Quanta Services.

Key Stats:

Gross margin shrank 2.7 percentage points to 15.2%. The contraction appeared to be driven by increased costs, which rose 19.9% from the year earlier quarter while revenue rose 16.1%.

Revenue has risen the past four quarters. Revenue increased 13.5% to $849 million in the first quarter. The figure rose 12.3% in the fourth quarter of the last fiscal year from the year earlier and climbed 54.5% in the third quarter of the last fiscal year from the year-ago quarter.

The company topped expectations last quarter after falling short of forecasts in the first quarter with a loss of 6 cents versus a mean estimate of net income of 3 cents per share.

Competitors to Watch: Dycom Industries, Inc. (NYSE:DY), EMCOR Group, Inc. (NYSE:EME), Pike Electric Corporation (NYSE:PIKE), Integrated Electrical Services, Inc. (NASDAQ:IESC), MasTec, Inc. (NYSE:MTZ), Comfort Systems USA, Inc. (NYSE:FIX), MYR Group Inc. (NASDAQ:MYRG), The Shaw Group Inc. (NYSE:SHAW), and UniTek Global Services Inc. (NASDAQ:UNTK).

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(Source: Xignite Financials)