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MasTec Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 3, 2011 05:26PM

MasTec Inc. (MTZ) filed Quarterly Report for the period ended 2011-09-30. Mastec Inc. has a market cap of $1.81 billion; its shares were traded at around $21.37 with a P/E ratio of 15.7 and P/S ratio of 0.8. Mastec Inc. had an annual average earning growth of 29.8% over the past 5 years.



Highlight of Business Operations:

Third quarter net income and diluted earnings per share were $31.8 million and $0.36 per share, respectively, representing an increase of $1.8 million and $0.01 per share, or 6% and 3%, respectively, versus the same period in the prior year. Factors contributing to our third quarter results included revenue growth, as previously discussed, improved leveraging of general and administrative expenses as a percentage of revenue, partially offset by a decrease in our gross margin percentage. The decline in gross margin percentage resulted from a combination of factors, including new DirectStar commission arrangements effective in 2011, as well as lower third quarter margins on certain projects. Our natural gas projects in the northeastern part of the United States have been negatively affected by adverse weather conditions, as mentioned above. Wireless projects, for which revenue growth has been robust, have experienced lower margins due to contractual volume discounts, as well as from certain growth-related project inefficiencies. While we were able to meet the increased levels of demand for wireless services, we incurred higher labor and other costs in order to complete certain projects. Gross margins on renewable projects were also lower in comparison to the same period in the prior year, due in large part to lower utilization of certain overhead costs as a result of decreased revenues, as discussed above.

Revenue. Our revenue was $865.3 million for the three months ended September 30, 2011, as compared with $631.9 million for the same period in 2010, representing an increase of $233.4 million or 36.9%. Of this increase, $114.8 million, or 49%, was attributable to businesses acquired during the second quarter of 2011. Revenues were favorably impacted by wireless, pipeline, install-to-the-home and energy transmission customers. Key customers driving growth in the third quarter of 2011 included DIRECTV®, AT&T, Energy Transfer Company and Talisman Energy. Continuing investments in new infrastructure for wireless technology, in addition to expansion of the geographic areas in which we do project work, yielded higher revenues from wireless projects in the third quarter of 2011 as compared with 2010. This growth was partially offset by pricing discounts on certain wireless projects that became effective in the first quarter of 2011. Pipeline revenues increased in the third quarter of 2011, driven by robust demand for pipeline infrastructure in the various natural gas shale basins, although severe flooding in the northeastern United States hurt our pipeline projects in the Marcellus shale basin. Install-to-the-home and energy transmission project activity was also strong in the third quarter of 2011. Our growth in wireless, pipeline, energy transmission and install-to-the-home activities was partially offset by lower levels of activity in renewable energy as a result of tightened access of our customers to project financing and delays resulting from changes to our customers’ capital spending projects.

Interest expense, net. Interest expense, net of interest income, was $8.9 million, or 1.0% of revenue, for the three months ended September 30, 2011, as compared with $7.3 million, or 1.1% of revenue, for the same period in 2010, representing an increase of approximately $1.7 million. This increase is largely attributable to $1.2 million of accretion expense associated with our New Notes as well as an increase in interest expense related to our Credit Facility. As of September 30, 2011, we had $27.0 million of outstanding revolving loans, $89.5 million of outstanding letters of credit and $483.5 million of remaining availability under our amended Credit Facility. See discussion below under “Credit Facility” for additional details.

Revenue. Our revenue was $2.2 billion for the nine months ended September 30, 2011, compared to $1.6 billion for the same period in 2010, representing an increase of $657.5 million, or 41.7%. Of this increase, $152.7 million, or 23%, was attributable to businesses acquired during the second quarter of 2011. Revenues were favorably impacted by wireless, pipeline, install-to-the-home and energy transmission customers. Key customers driving growth in the nine months of 2011 included AT&T, El Paso Corporation, DIRECTV® and Energy Transfer Company. Continuing investments in new infrastructure for wireless technology, in addition to expansion of the geographic areas in which we do project work, yielded higher revenues from wireless projects in 2011 as compared with 2010. This growth was partially offset by pricing discounts on certain wireless projects that became effective in the first quarter of 2011. Pipeline revenues increased for the nine months ended September 30, 2011, driven by continued execution of a large pipeline project with El Paso Corporation, as well as from other pipeline projects in the various natural gas shale basins. Install-to-the-home and energy transmission project activity has also been strong in 2011. Revenue growth in wireless, pipeline, energy transmission and install-to-the-home activities was partially offset by the negative impact of adverse weather conditions on certain pipeline projects and by lower levels of activity on renewable energy projects. Severe flooding in the northeastern United States hurt our pipeline projects in the Marcellus shale basin. In addition, our renewable energy project revenues have declined versus the prior year as a result of tightened access of our customers to project financing and delays resulting from changes to our customers’ capital spending projects.

Interest expense, net. Interest expense, net of interest income, was $25.1 million, or 1.1% of revenue, for the nine months ended September 30, 2011, as compared with $21.9 million, or 1.4% of revenue, for the same period in 2010, representing an increase of $3.2 million. This increase was largely attributable to $3.0 million of accretion expense associated with our New Notes and an increase in interest expense related to our Credit Facility. These increases were partially offset by a decrease in interest expense on equipment notes. In the fourth quarter of 2010, we refinanced $13.4 million of 7.05% equipment notes with a new equipment note bearing interest at approximately 3.53% per annum.

Read the The complete Report



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