Dj Mastec Price Target Raised To $267.00/Share From $240.00 By Stifel

MasTec currently trades at $218.54 and has been a dream stock for shareholders. It’s returned 249% since December 2020, tripling the S&P 500’s 84.3% gain. The company has also beaten the index over the past six months as its stock price is up 38.6% thanks to its solid quarterly results.

Is now the time to buy MasTec, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.

Why Is MasTec Not Exciting?

Despite the momentum, we don't have much confidence in MasTec. Here are three reasons why MTZ doesn't excite us and a stock we'd rather own.

1. Low Gross Margin Reveals Weak Structural Profitability

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products and commands stronger pricing power.

MasTec has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 12.9% gross margin over the last five years. Said differently, MasTec had to pay a chunky $87.07 to its suppliers for every $100 in revenue.

2. Weak Operating Margin Could Cause Trouble

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

MasTec was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

3. Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, MasTec’s margin dropped by 4.2 percentage points over the last five years. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business. MasTec’s free cash flow margin for the trailing 12 months was 3%.

Final Judgment

MasTec isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 28× forward P/E (or $218.54 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. Let us point you toward a top digital advertising platform riding the creator economy.

The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how engineering and design services stocks fared in Q3, starting with Dycom .

Companies providing engineering and design services boast ever-evolving technical expertise. Compared to their counterparts who manufacture and sell physical products, these companies can also pivot faster to more trending areas due to their smaller physical asset bases. Green energy and water conservation, for example, are current themes driving incremental demand in this space. On the other hand, those providing engineering and design services are at the whim of construction and infrastructure project volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates.

The 5 engineering and design services stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 2.6% while next quarter’s revenue guidance was 0.7% below.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 13.2% since the latest earnings results.

Dycom

Working alongside some of the most popular mobile carriers in the world, Dycom builds and maintains telecommunications infrastructure.

Dycom reported revenues of $1.45 billion, up 14.1% year on year. This print exceeded analysts’ expectations by 3%. Overall, it was an exceptional quarter for the company with a solid beat of analysts’ adjusted operating income estimates and an impressive beat of analysts’ EBITDA estimates.

“We delivered an exceptional third quarter with record revenue, profitability and backlog, reinforcing our industry leadership and operational discipline. As a result of our strong performance, we are increasing the midpoint of our full-year revenue outlook,” said Dan Peyovich, Dycom’s President and Chief Executive Officer.

Interestingly, the stock is up 10.2% since reporting and currently trades at $326.49.

We think Dycom is a good business, but is it a buy today? Read our full report here, it’s free for active Edge members.

Best Q3: Sterling

Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure provides civil infrastructure construction.

Sterling reported revenues of $689 million, up 16% year on year, outperforming analysts’ expectations by 11.3%. The business had an incredible quarter with a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ revenue estimates.

Sterling achieved the biggest analyst estimates beat and highest full-year guidance raise among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 19.5% since reporting. It currently trades at $316.05.

Is now the time to buy Sterling? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q3: AECOM

Founded in 1990 when a group of engineers from five companies decided to merge, AECOM provides various infrastructure consulting services.

AECOM reported revenues of $4.18 billion, up 1.6% year on year, falling short of analysts’ expectations by 3.3%. It was a slower quarter as it posted a significant miss of analysts’ revenue estimates and full-year EBITDA guidance slightly missing analysts’ expectations.

AECOM delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 22% since the results and currently trades at $102.92.

Read our full analysis of AECOM’s results here.

EMCOR

Through its network of over 70 subsidiaries, EMCOR provides electrical, mechanical, and building construction and services

EMCOR reported revenues of $4.30 billion, up 16.4% year on year. This result met analysts’ expectations. More broadly, it was a mixed quarter as its performance in some other areas of the business was disappointing.

EMCOR had the weakest full-year guidance update among its peers. The stock is down 25.2% since reporting and currently trades at $581.36.

Read our full, actionable report on EMCOR here, it’s free for active Edge members.

MasTec

Involved in the 1996 Olympic Games MasTec is an infrastructure construction company that specializes in the telecommunications, energy, and utility industries.

MasTec reported revenues of $3.97 billion, up 22% year on year. This print topped analysts’ expectations by 1.6%. It was a strong quarter as it also logged an impressive beat of analysts’ revenue estimates and a solid beat of analysts’ adjusted operating income estimates.

MasTec achieved the fastest revenue growth among its peers. The stock is down 9.7% since reporting and currently trades at $193.10.

Read our full, actionable report on MasTec here, it’s free for active Edge members.