Quanta Services Inc. PWR, a leading provider of infrastructure solutions for the electric power, pipeline, and telecommunications sectors, has announced an 11.1% increase in its quarterly dividend. This move underscores the company’s confidence in its financial health and commitment to enhancing shareholder value. Let’s dive into the details and assess what this could mean for investors.

The company boosted its quarterly dividend to 10 cents per share (40 cents annually) from 9 cents (36 cents annually). The dividend will be paid on Jan. 13, 2025, to its stockholders of record as of Jan. 2. For investors, the increased payout translates to a forward annualized dividend yield of approximately 0.12% at the current stock price.

This hike reflects its confidence in the stability of the base business, long-term prospects and solid financial position. A dividend increase not only enhances shareholder returns but also raises a stock’s market value. In fact, companies often tend to attract new investors and retain the old ones through this strategy.
 

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The stock surged 85% in the past year compared with the Zacks Engineering - R and D Services industry’s 25.7% growth. The stock has fared better than the Zacks Construction sector and the S&P 500 Index’s 41% and 30% rallies, respectively. PWR stock has a VGM Score of B, with Growth Score of A and Momentum Score of B.

A Look at Quanta’s Fundamentals

Quanta is poised for robust growth, driven by several key factors rooted in its strategic positioning, market dynamics, and operational capabilities.

The ongoing energy transition, fueled by federal and state policies, is creating unprecedented opportunities for infrastructure upgrades. Utilities are facing rising power demand for the first time in decades, driven by the proliferation of technologies like artificial intelligence and the rapid expansion of data centers. Quanta’s integration of Cupertino Electric enhances its ability to provide comprehensive solutions for data center electrification, positioning it as a critical player in meeting these evolving needs. Its diverse service portfolio, which includes renewable energy projects, grid modernization, and technology solutions, places it at the intersection of utility, renewable energy, and technology industries, a convergence that is accelerating demand for its services.

Quanta’s strategic acquisitions have been pivotal in mitigating external challenges while expanding its market capabilities. The recent purchase of a transformer manufacturing business exemplifies this approach, addressing supply chain constraints while enhancing its ability to self-perform critical components of its projects.

The company anticipates double-digit earnings per share (EPS) growth of around 20% for 2024 and continued strong performance in free cash flow and adjusted EBITDA. Net cash provided by operating activities was $739.9 million in the third quarter, up from $406.6 million a year ago. Free cash flow (FCF) in the third quarter was $539.5 million, up from $279.8 million reported in the year-ago quarter.

The company reported a 12-month backlog of $19.13 billion and a total backlog of $33.96 billion at the end of September. This compares with the December 2023-end 12-month backlog of $17.23 billion and the total backlog of $30.11 billion. In the year-ago period, the 12-month backlog stood at $17.02 billion and the total backlog at $30.1 billion. The company’s solid backlog level speaks of its ability to generate higher revenues in future.

PWR’s Zacks Rank & Key Picks

The company currently has a Zacks Rank #3 (Hold).

Here are some better-ranked stocks from the Zacks Construction sector:

Sterling Infrastructure, Inc. STRL presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 21.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of STRL have gained 203.9% in the past year. The Zacks Consensus Estimate for STRL’s 2024 sales and EPS implies an increase of 9% and 33.3%, respectively, from the prior-year levels.

Louisiana-Pacific Corporation LPX currently sports a Zacks Rank of 1. LPX delivered a trailing four-quarter earnings surprise of 30.7%, on average. The stock has gained 86.8% in the past year.

The Zacks Consensus Estimate for LPX’s 2024 sales and EPS indicates an increase of 12.7% and 72.1%, respectively, from a year ago.

MasTec, Inc. MTZ presently sports a Zacks Rank of 1. MTZ delivered a trailing four-quarter earnings surprise of 40.2%, on average. The stock has risen 147.7% in the past year.

The Zacks Consensus Estimate for MTZ’s 2024 sales and EPS indicates an increase of 1.9% and 84.3%, respectively, from a year ago.

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Quanta Services, Inc. (PWR) : Free Stock Analysis Report

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