Quanta Services Inc. Earnings Cheat Sheet: Margins Suffer for Five Quarters Straight, Profit Drops

S&P 500 (NYSE:SPY) component Quanta Services Inc. (NYSE:PWR) reported its results for the third quarter. Quanta Services 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 Third Quarter

Results: Net income for the general contractors company fell to $52 million (25 cents per share) vs. $62.8 million (30 cents per share) a year earlier. This is a decline of 17.2% from the year earlier quarter.

Revenue: Rose 3.7% to $1.25 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: PWR reported adjusted net income of 29 cents per share. By that measure, the company beat the mean estimate of 24 cents per share. It beat the average revenue estimate of $1.21 billion.

Quoting Management: “Quanta mobilized crews and equipment on a number of electric transmission projects in the third quarter. We also secured approximately $250 million in backlog of large diameter pipeline projects during the same period,” said Jim O’Neil, president and chief executive officer of Quanta Services. “We expect our fourth quarter performance to be stronger than this year’s third quarter, even though the fourth quarter is subject to unpredictable weather conditions. We continue to see improvement in our overall business environment as reflected in our record $7.2 billion in total backlog, as well as a workforce increase of 2,500 employees, or 17 percent, since June 30, 2011. Despite ongoing regulatory headwinds faced by our customers, we believe we are well positioned to deliver a meaningful increase in revenues and profits in 2012.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 0.2 percentage point to 15.6% from the year earlier quarter. Over that time, margins have contracted on average four percentage points per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 16.1% to $1.01 billion in the second quarter. The figure rose 13.5% in the first quarter from the year earlier and climbed 12.3% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now beaten estimates the last two quarters. In the second quarter, it topped expectations with net income of 17 cents versus a mean estimate of net income of 15 cents per share.

Looking Forward: Analysts appear increasingly optimistic about the company’s results for the next quarter. The average estimate for the fourth quarter has moved up from 30 cents a share to 38 cents over the last ninety days. The average estimate for the fiscal year is 70 cents per share, a rise from 69 cents ninety days ago.

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), Pro-Tech Industries, Inc. (PTCK), The Shaw Group Inc. (NYSE:SHAW), and UniTek Global Services Inc. (NASDAQ:UNTK).

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(Source: Xignite Financials)