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On Monday, Stifel analysts adjusted their outlook on Quanta Services (NYSE:PWR) stock, lowering the price target to $323 from the previous $388, while still maintaining a Buy rating. The revision followed the company’s fourth-quarter financial performance, which showed revenue of $23.7 billion, falling slightly short of expectations. However, the bottom line exceeded forecasts, partly due to arbitration benefits that contributed $21 million to operating income and $0.23 to earnings per share (EPS). Additionally, emergency restoration work generated approximately $100 million more in high-margin revenue than anticipated. According to InvestingPro data, the company’s gross profit margin stands at 14.8%, reflecting some pressure on profitability despite the high-margin emergency work.
Quanta Services also provided 2025 guidance that surpassed analyst expectations, partly due to over $500 million in revenue from acquisitions completed in the first quarter of 2025. The company’s backlog grew by 15% year-over-year, and orders saw a 23% increase, with significant growth observed in the Renewable Energy and Electric Power sectors. The Renewable Energy sector’s backlog rose by 7% year-over-year, with orders surging 40%, while the Electric Power sector’s backlog and orders increased by 28% and 32% respectively. InvestingPro analysis shows the company maintains a healthy financial position with a solid Altman Z-Score of 5.42 and moderate debt levels, supporting its aggressive growth strategy.
Despite the strong guidance and order book growth, Quanta Services’ share price reacted negatively, with the stock down about 15% year-to-date according to InvestingPro data. Analysts believe this reaction can be attributed to several factors: high market expectations, recognition of one-time arbitration and emergency restoration benefits in the quarter’s results, the impact of first-quarter acquisitions on the initial 2025 guidance, and continued near-term uncertainty regarding load growth following the DeepSeek initiative. The stock currently trades at a P/E ratio of 48.8x and an EV/EBITDA multiple of 21.4x, suggesting premium valuations despite recent price declines.
Stifel’s commentary highlighted that while the fourth-quarter revenue did not meet expectations, the company’s overall financial health was bolstered by unexpected benefits and a strong outlook for the future, evidenced by a robust backlog and order increase. This growth was particularly notable in sectors critical to the ongoing transition to renewable energy and modernized power infrastructure. The company’s revenue growth of 13.4% in the last twelve months and projected growth of 13% for FY2025 underscore its strong market position.
Quanta Services has demonstrated a capacity to secure significant new business, particularly in the high-demand areas of Renewable Energy and Electric Power, which are expected to continue to expand. The company’s strategic acquisitions in the first quarter of 2025 have also contributed positively to its revenue projections, showcasing a proactive approach to growth and market positioning.
In other recent news, Quanta Services reported strong fourth-quarter 2024 earnings, with an adjusted EPS of $2.94, exceeding analyst expectations by 12.2%. However, the company’s revenue of $6.55 billion slightly missed projections. Despite the revenue shortfall, Quanta Services’ backlog reached a record $34.5 billion, indicating robust future demand. The company also announced strategic acquisitions worth $560 million, including an Australian engineering firm and a U.S. civil contractor, to enhance its service offerings.
Bernstein analysts maintained an Outperform rating on Quanta Services, setting a price target of $347, while Roth/MKM initiated coverage with a Buy rating and a $350 target, highlighting the company’s pivotal role in the electrical infrastructure sector. BofA Securities also adjusted its outlook, raising the price target to $368, and reaffirmed a Buy rating, citing Quanta’s impressive financial performance and strong market positioning. The firm anticipates double-digit growth in revenue and EBITDA for 2025, supported by substantial capital expenditures in the utilities and technology sectors.
Quanta Services recently secured a multi-year contract to build a large-scale fiber network for Lumen Technologies, enhancing its communications segment. The company continues to focus on expanding its presence in the renewable energy and data center markets, which are expected to drive significant growth in the coming years. These developments underscore Quanta Services’ strategic positioning in the evolving energy and infrastructure landscape.
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