1. Quanta Services Inc. (NYSE:PWR)
Market Cap as of October 22: $46.17 billion
Number of Hedge Fund Holders: 63
Quanta Services Inc. (NYSE:PWR) provides infrastructure services for electric power, pipeline, industrial and communications industries. It offers a wide range of services, including the planning, design, installation, program management, maintenance, and repair of most types of network infrastructure.
Revenue made in the second quarter of 2024 totaled $5.59 billion, marking an improvement of 10.81%, along with a record total backlog of $31.3 billion and strong cash flow. The company’s results reflect the strength of its portfolio, effective execution, and continued demand for its services, driven by customers’ multiyear programs to build renewable generation and power grid infrastructure.
Its collaborative solution-based approach is highly valued by clients, particularly in the context of the ongoing energy transition and infrastructure upgrades. Its strategic initiatives and goals for the coming years are expected to drive significant growth. The company’s diverse service lines and geographic reach expand its total addressable market, providing opportunities for resource allocation and operational efficiencies.
Quanta Services Inc. (NYSE:PWR) recently completed the acquisition of Cupertino Electric for $1.54 billion, including $1.3 billion in cash and $225 million in Quanta shares. The deal includes a potential additional payment of up to $200 million based on financial targets. This acquisition is expected to immediately boost Quanta Services Inc. (NYSE:PWR)’s growth, cash flow, and earnings per share, with projected contributions of $175-$195 million to adjusted core profit and $0.40-$0.50 to adjusted diluted earnings per share for FY25.
The company’s diverse service offerings and strategic focus on infrastructure investment position it well for long-term growth in the evolving energy landscape. With a robust financial position and commitment to operational efficiency, it is well-positioned to capitalize on attractive opportunities.
Artisan Mid Cap Fund stated the following regarding Quanta Services, Inc. (NYSE:PWR) in its fourth quarter 2023 investor letter:
“Along with DexCom, notable adds in the quarter included Quanta Services, Inc. (NYSE:PWR) and Jabil. Quanta provides outsourced skilled labor for maintenance and construction services, primarily to utilities. We have followed the company for over a decade and have witnessed its shift from oil and gas to renewables. The energy transition (solar and wind farms, electric vehicles, etc.) requires investments in the US energy grid to support greater electrification. At the same time, climate change is increasing stress on the existing grid, forcing utilities to increase maintenance spending. Furthermore, Federal incentive programs, such as the Inflation Reduction Act and Bipartisan Infrastructure Act, will help fuel Quanta’s long-term growth given its expertise in transmission and distribution connections as renewable energy infrastructure seeks to connect to the grid. The stock sold off early in the quarter on concerns that higher interest rates would lead to a pullback in renewables investments by utility customers. However, based on our industry research, we think Quanta’s key customers are well resourced and committed to meeting long-term electrification needs via infrastructure investment. We used the selloff as an opportunity to move the position into the CropSM at a more attractive valuation.”
As we acknowledge the growth potential of Quanta Services Inc. (NYSE:PWR), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PWR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
