Quanta Services shares target raised, neutral rating on growth prospects

On Monday, Quanta Services (NYSE:PWR) saw its stock price target increased by DA Davidson from the previous $260 to $295, while the firm maintained a Neutral rating on the stock. The adjustment was made in light of improved estimates for 2025 and the introduction of preliminary forecasts for 2026, which suggest a positive outlook for the company's sustained growth.

DA Davidson's revised price target is based on expectations of continued revenue and cash flow growth, pegging the new target at 16 times the firm's 2026 EBITDA estimate. This change reflects the firm's anticipation of Quanta Services benefiting from ongoing positive trends in electrical delivery, power generation development, and complex facility construction.

The analysis by DA Davidson indicates that Quanta Services is well-positioned to capitalize on robust infrastructure demand in the U.S. The firm's forecasts also assume a free cash flow (FCF) conversion of approximately 1.5 times net income predictions into 2025/2026. The new price target represents 27 times and 24 times the FCF per share forecasts for the respective years.

Despite the optimistic growth projections, DA Davidson holds that the current stock valuation already accounts for the company's prospects. The firm's stance remains neutral, suggesting that the potential opportunities and benefits Quanta Services might experience are already reflected in the stock's price and market expectations.

In summary, while DA Davidson acknowledges the strength of the tailwinds propelling Quanta Services, it also notes limited concerns regarding the certainty of these opportunities. The firm's position indicates a belief that the market has already priced in the company's potential for growth and expansion in the near future.

In other recent news, Quanta Services has been making notable strides in its financial performance and growth prospects. The company reported robust third-quarter results, with revenues hitting $6.5 billion and a net income of $293.2 million. Moreover, Quanta's adjusted earnings per share (EPS) reached $2.72, and the total backlog set a new record at $34 billion.

These recent developments demonstrate strong demand in power generation and infrastructure sectors. Jefferies has lifted Quanta Services' target to $299, maintaining a Hold rating on the stock. This adjustment follows Quanta's third-quarter performance and the expected rise in capital expenditure for Transmission & Distribution (T&D) and data center trends.

Quanta Services' acquisition of Cupertino Electric has further bolstered its technology and data center capabilities. The company expects revenues between $1 billion and $1.1 billion from this acquisition.

Despite facing incremental costs due to Hurricanes Beryl and Helene, Quanta Services projects double-digit growth in EPS for 2025 and aims to reach $11 to $12 per share by 2026. Furthermore, the company anticipates double-digit margins in the renewable segment by 2025.

InvestingPro Insights

Quanta Services' strong market position and growth potential, as highlighted by DA Davidson's analysis, are further supported by recent InvestingPro data. The company's revenue growth of 17.36% over the last twelve months and a quarterly growth of 15.52% in Q3 2024 align with the firm's positive outlook on Quanta's sustained growth trajectory.

InvestingPro Tips reveal that Quanta Services is a prominent player in the Construction & Engineering industry, with 6 analysts revising their earnings upwards for the upcoming period. This corroborates DA Davidson's optimistic forecasts for 2025 and 2026. The company's high return over the last year, with a 79.65% price total return, also supports the positive sentiment surrounding its stock.

However, investors should note that Quanta is trading at a high P/E ratio of 56.11, which may indicate that the stock is already priced for growth, aligning with DA Davidson's neutral stance. The company's PEG ratio of 3.61 suggests it might be trading at a premium relative to its earnings growth rate.

For a more comprehensive analysis, InvestingPro offers 14 additional tips for Quanta Services, providing deeper insights into the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.