Quanta Services (NYSE:PWR) Needs More Clarity Before Consensus Can be Met

Quanta Services (NYSE:PWR) continues to be challenged, even after being awarded the transmission contract in Maine. FBR said that the contract alone won't be enough to reach consensus expectations for 2011, and wait to see what other awards Quanta gets before making any further revisions in their outlook.

FBR said, "Our Underperform rating is a reflection of our concern that backlog was not large enough to support consensus expectations for 2011. This project helps to achieve 2011 expectations, but does not provide upside in itself. We await further awards before becoming more constructive on the shares. Of note, there are several additional large transmission projects out to bid currently, including Texas CREZ and CapX2020, which if PWR is successful at winning some portion of these projects, would be slightly positive for the shares. At $19.47, the shares are trading at 8x 2011 EV/EBITDA, a full multiple given its current growth outlook. At $23, the shares would trade at 10x 2011 EV/EBITDA, the average multiple of larger E&C peers through a cycle. Should backlog increase significantly, we suspect the shares have modest upside, yet await successful awards before becoming more constructive."

FBR Capital maintains an "Underperform" rating on Quanta Services, which closed Tuesday at $19.93, up $0.46, or 2.36 percent.