MasTec: The Risk Is Currently To The Upside

Nov. 10, 2020 1:41 PM ETMasTec, Inc. (MTZ)6 Comments
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WG Investment Research


  • MasTec recently reported better-than-expected Q3 2020 earnings and management provided solid Q4 2020 guidance.
  • The company's quarterly operating metrics were well-received by the market, and I believe that MasTec is well-positioned for 2021 and beyond.
  • We are long MasTec, and we plan to add to our position on any significant pullbacks.

MasTec (NYSE:MTZ) is a small-cap infrastructure construction company that has been negatively impacted by the disruptions of the global pandemic. The company reported lackluster operating results over the first half of 2020, so it should come as no surprise that MasTec's stock has underperformed the broader market by a wide margin.


However, as shown, MTZ shares have performed well since the March/April 2020 lows. And looking forward, there is a lot to like about this company as I believe that the significant underperformance has created a buying opportunity for investors that are interested in a company that has great long-term business prospects.

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On October 29, 2020, MasTec reported Q3 2020 operating results that beat on the bottom-line but that missed the consensus top-line estimate. The company reported adjusted EPS of $1.59 (beat by $0.15) on revenue of $1.69B (missed by $240M), which were impressive results given the backdrop. However, the operating results do not compare favorably to the year-ago quarter.

Source: Q3 2020 Press Release

Highlights from the quarter:

  • Revenue fell by ~16% YoY with the Oil & Gas (-52%) segment being the biggest contributor to the company's top-line decline;
  • Adjusted EBITDA increased by ~5% YoY (to $264.8mm) -- it should be noted that the non-Oil & Gas segments reported a ~83% YoY increase in adjusted EBITDA;
  • The company reported record cash flows from operations (more on this below); and
  • The 18-month backlog now stands at $7.7B.

There was a lot to like about MasTec's Q3 2020 results but it is also important to note that the Oil & Gas segment continues to be a major drag.

Source: Q3 2020 Press Release

The Oil & Gas segment's revenue and adjusted EBITDA were down 52% and 25%, respectively. Management still contends that the disappointing Oil & Gas results are largely related to timing

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long MTZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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