Opinions
Stephanie Link, Chief investment strategist, Hightower
Quanta Services
PWR-N
BUY
Feb 28, 2025
Stock price when the opinion was issued
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He owns EME instead. On a 5-year chart, PWR has outperformed. But on a 1-year chart, EME is ahead. At 28x earnings, the multiple on PWR is about 50% higher than its normalized range, so it's not as good a value today. He'd switch into EME. EME has better profitability metrics, EPS revisions are better, PE is 20x earnings.
It's beaten the S&P for 5 straight years. They're decentralized, operating in hundreds of smaller, regional contractors tailored to help customers in their areas. And yet they benefit from scale when negotiating with suppliers and customers. From 2010-2022, they earned a 14% compound annual revenue growth rate vs. 7% by the S&P. Consistent. Shares sank in September-October, but they reported a strong quarter and recovered nearly all that lost ground. From January to August their engineering and construction businesses soared on the back of Biden's infrastructure bill. Trades at 25x 2024 PE, not cheap, okay, but he feels the premium is worth paying for because a wave of infrastructure spending is coming as rates decline.
She trimmed GE Vernoa to buy more Eaton and Quanta Services, and both just reported blow-out quarters. Quanta: EBITDA +40%, backlog +14%. Eaton: data centres +45%, pipeline +65%, and backlog 3x more than normal. Good valuations.