MasTec: An "Arms Merchant" In Broadband Wars

Aug. 3.07 | About: MasTec, Inc. (MTZ)

$940 million infrastructure contractor MasTec (NYSE:MTZ), which builds conduits and tunnels in properties for the stringing of broadband wires, is rising after the company Wednesday night reported profit of 24 cents that was a penny ahead of analysts’ estimates but sales of $256 million that were up 11% year-over-year but shy of analysts’ estimates of $263.2 million.

Needham & Co. analyst John Harmon says MasTec is both a turnaround story and an “arms merchant” in the broadband wars because it is helping to build out fiber, cable and satellite television connections. He says the shortfall in sales is actually a good thing because it was done to get MasTec out of some low-margin contracts, which promises to boost profitability over time.

The company also raised the bottom end of its profit forecast for this year from 80 cents to 84 cents, and the mid-point of that range would be a penny above analysts’ average estimate of 86 cents. The sales forecast was kept at a range of $1.04 to $1.06 billion, and the mid-point of that is in-line with analysts’ $1.05 billion.

Harmon is raising his estimates to 85 cents and his estimate for next year goes up from $1.04 per share to $1.10 per share. Harmon sees the roll-out of new satellites by DirecTV (DTV), providing the company with extra hi-def channel capacity it can install.

Harmon’s $16 price target is thus about 19x this year’s projected EPS and 14.5x next year’s.

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