Stifel sees positive trends in clean energy E&C activity

Thursday, March 27, 2025 – Stifel analysts have released a report on the Americas- Specialty Infrastructure Services sector, highlighting a significant year-over-year growth in the clean energy project pre-construction pipeline and an increase in long-term project starts. The sector’s growth potential is reflected in key industry players like MasTec (NYSE:MTZ), which according to InvestingPro data, maintains a moderate debt level with a debt-to-equity ratio of 0.2 and shows strong historical returns over the past decade. The report, which focuses on utility-scale solar, battery, and on-shore wind projects in the United States, indicates a robust +82% year-over-year growth in the pre-construction project pipeline for February. Additionally, the firm’s proprietary long-term project starts saw a +30% increase.

The analysts at Stifel have noted a slight decrease in projects currently under construction, down by 5%. This decline is attributed to a surge in project completion activity, particularly in the solar and battery sectors. While the industry shows promise, InvestingPro analysis indicates that companies in this sector are trading at relatively high earnings multiples, suggesting investors are pricing in substantial growth expectations. For deeper insights into infrastructure services companies’ valuations and metrics, consider exploring InvestingPro’s comprehensive research reports covering over 1,400 US stocks. The completion rate has been bolstered by improvements in the supply chain, which faced challenges in 2022, especially concerning solar panels.

Despite the dip in construction activity, the ratio of the project pipeline to long-term starts, which stands at 2.9x, continues to signal a healthy outlook for the industry. Stifel’s report also mentions that the size of the clean energy project pipeline is near record highs and that project cancellations, which saw an increase in 2023, now seem to have reached their peak.

Historical data suggests that over 90% of the projects in the pre-construction phase will eventually be built, pointing to a strong future for the sector. The report identifies the growing power demand from AI data centers as a key driver of growth. However, recent uncertainties surrounding the Inflation Reduction Act (IRA) and trade issues are considered potential risks to this positive trend. Looking at industry fundamentals, InvestingPro data shows that leading companies in the sector are expected to maintain profitability this year, despite recent market volatility that has led to significant price corrections over the past three months.

In other recent news, MYR Group (NASDAQ:MYRG) Inc. reported its fourth-quarter 2024 earnings, which revealed a significant miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.37, falling short of the anticipated $0.70, and generated revenues of $830 million, which was below the expected $886.58 million. Despite the earnings shortfall, MYR Group saw an improvement in its gross margin, which rose to 10.4% from 9.7% year-over-year. Meanwhile, KeyBanc Capital Markets upgraded MYR Group’s stock rating from Sector Weight to Overweight, citing a new price target of $136.00. The upgrade was influenced by the company’s improving revenue and margin growth profile and its valuation being below the three-year average EV/EBITDA ratio. Kansas City Capital also raised its rating on MYR Group to Outperform, highlighting the company’s strategic position in the energy sector and setting a new 12-18 month price target of $143. These analyst upgrades come amid MYR Group’s efforts to overcome execution challenges on select projects and its strategic focus on energy transition opportunities.

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