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Quanta Services (PWR) is near the top of its buy zone as this energy infrastructure contractor benefits from industry and government spending. This Big Cap 20 company also beat analyst estimates for third-quarter earnings and sales last month.
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After crossing its 144.41 buy point last month from a cup with handle, the infrastructure stock is in a buy zone to 151.63, according to the MarketSmith chart. PWR stock’s relative strength line is trending higher after shares found support at the 21-day exponential moving average after the company reported earnings on Nov. 3.
Quanta reported Q3 earnings that soared 20% from the previous year’s quarter, narrowly beating analyst estimates on both sales and earnings.
For the current quarter, FactSet’s survey of analysts expect Quanta to earn $1.60 a share on sales of $4.27 billion.
Quanta also stands to benefit from increased capital spending by energy giants Exxon Mobil (XOM) and Chevron (CVX). Those companies this past week provided investors a glimpse into 2023 and beyond, with Exxon Mobil announcing Thursday it will increase stock buybacks through 2024.
Infrastructure Stocks Gain As Spending Increases
Quanta provides engineering and construction services to the electric power, renewable energy, oil and gas, and communication industries. The company is poised to benefit from a trifecta of industry and government spending initiatives: accelerated capital spending by utilities, the expansion of 5G services and rural broadband, and the 2021 federal infrastructure spending bill.
IBD Live: A New Tool For Daily Stock Market Analysis
IBD Stock Checkup gives Quanta high ratings. The infrastructure stock earns a 97 IBD Composite Rating, a 92 RS Rating, and a 97 EPS Rating, all out of a best-possible 99.
Wall Street also likes PWR stock. Last month, Credit Suisse maintained a buy rating and raised its price target to 186 a share, from 168.
Quanta A Leader In Heavy Construction Group
Quanta should benefit from the bipartisan $1 trillion infrastructure bill, passed in 2021. Its renewable energy unit should especially benefit from the Inflation Reduction Act of 2022, which includes various clean-energy incentives and provisions.
The heavy construction industry group on Friday ranked No. 78 out of 197 groups tracked by IBD. Quanta is ranked No. 2 in the group, behind Sterling Infrastructure (STRL) but above AECOM (ACM) and KBR (KBR).
Quanta generates 59% of revenue through its Electric Power business. The Underground Utility and Infrastructure Solutions segment accounts for 27% of revenue and its new Renewable Energy segment for 14%.
Follow Michael Molinski on Twitter @IMmolinski
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