PWR - MasTec: Secular Trends Regulatory Tailwinds And Improving Execution Should Drive Upside

2024-07-01 15:13:12 ET

Summary

• MasTec, Inc. has good growth prospects driven by 5G infrastructure expansion, federal funding, sustainability trends, and energy independence needs.
• Despite project execution issues impacting margins, improvements in bid discipline and execution are expected to drive margin growth.
• The stock is trading at a discount to its peer, Quanta Services, and has the potential for a valuation re-rating as execution improves and demand increases.

Investment Thesis

MasTec, Inc. ( MTZ ) has good growth prospects ahead, driven by secular and regulatory tailwinds across its end markets. In the communications segment, revenue growth should benefit from the ongoing expansion of 5G infrastructure and federal funding under the BEAD and RDOF programs. Further, megatrends like sustainability and clean energy transition, supported by federal incentives like the Inflation Reduction Act, should drive revenue growth in the clean energy and infrastructure segment. Additionally, strength in the Oil and Gas segment driven by the increasing need for energy independence, and secular demand drivers in the Power Delivery segment including the buildout of data centers and the need for power transmission investments should contribute to revenue growth in the coming quarters. In the medium to long term, a potential reversal in the interest rate cycle should result in a swift recovery in the company’s revenues....

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