May 15, 2019

MTZ – Although management has concerns about margins, projects, and costs, market expectations are still too bearish, suggesting longer-term upside remains warranted


  • MasTec, Inc. (MTZ:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 16.4x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and while management has concerns about EBITDA margin performance, infrastructure projects, and end market expansion costs, their confidence in their backlog, along with industry tailwinds, provide significant potential for outperformance and equity upside
  • Specifically, management is confident in backlog growth. However, they may lack confidence in their ability to sustain higher-margin project activity, normalize delays and inefficiencies, and improve EBITDA margins, specifically in their Oil and Gas segment. Furthermore, they may be concerned about the progress of a 5G rollout, AT&T’s wireless business mix, and end market expansion costs. Also, they may be exaggerating their small project wins, the progress of wind repowering and water infrastructure projects, and optimism in their future outlook
  • Despite concerns about margins, projects, and expansion costs, management’s confidence in their backlog and long-term industry tailwinds provide significant potential for outperformance and equity upside.
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