|Shares Out. (in M):||82||P/E||14x||9.6x|
|Market Cap (in $M):||1,760||P/FCF||15x||14x|
|Net Debt (in $M):||1,008||EBIT||276||367|
Sign up for free guest access to view investment idea with a 45 days delay.
MTZ offers 60%+ upside over the next 12-18 months in asset-light E&C and Services company as multiple secular tailwinds take hold. Tightening capacity in NA long-haul pipeline construction, the reacceleration of AT&T capex and DTV adoption, and growth in gigabit fiber installations will drive revenue and margin upside for the next 3+ years. Free upside optionality in Mexican (and Cuban) infrastructure build-out catalysts and margin recovery in Transmission segment offer incremental earnings levers on top of robust fundamental trends in the base businesses. Legacy operational and reporting issues (multiple guide-downs in 2014 and a delayed 10-K filing in 2015) are still weighing on sentiment, despite a 75% move off the February lows. $34 base case PT (53% upside) with bull-case to $43 (100% upside) on our above-street 2017 EBITDA at mid-cycle multiples (6-7x EBITDA).
BUSINESS DESCRIPTION AND HISTORY
1. Oil & Gas backlog is largest in firm’s history (having just doubled sequentially into year-end 2015), and management guidance suggests this project backlog will be completed AND replaced within the next 6 to 9 months.
2. Oil & Gas EBITDA margins show potential for 200-300bps lift from 2015 as projects ramp and utilization improves across the industry.
3. Multiple tailwinds driving Communications business: 1) capex cycle improving for both wireless and wireline network infrastructure and 2) AT&T pushing faster DirecTV sub growth. Both offer additional organic growth opportunities to drive further margin expansion.
4. Free upside options in a multi-year infrastructure build-out in Mexico (O&G and Communications) and margin recovery in money-losing Transmission segment.
Electrical Transmission (ET) Segment
5. Company is run by multi-generational owner / operators with material equity holdings; large open-market insider buys within the last year suggest even more confidence in the business trajectory in 2016+.
SUMMARY OF VARIANT VIEWS
VALUATION AND TARGET PRICE
BASE = $34 stock (59% upside) $565m in FY17 EBITDA at a 6.3x multiple. Key assumptions: Communications revenue and EBITDA of $2.25B / $286m (12.7% margin). Oil and gas revenue and EBITDA of $2.28B / $302m (13.2% margin). Net debt of $725m (1.3x levered), FCF of $188m (FCF generation will remain depressed for the near future as MTZ requires heavy working capital investment to prepare for oil/gas ramp)
BULL = $43 stock (96% upside) $615m in FY17 EBITDA at a 7.0x multiple. Key assumptions: Communications revenue and EBITDA of $2.35B / $307m (13.1% margin). Oil and gas revenue and EBITDA of $2.31B / $314m (13.6% margin).
BEAR = $19 stock (14% downside) $425m in FY17 EBITDA at a 5.5x multiple. Key assumptions: Communications revenue and EBITDA of $2.13B / $251m (11.8% margin). Oil and gas revenue and EBITDA of $1.85B / $214m (11.5% margin).
2H16 operational beats, backlog growth and guidance raises into 2017
Are you sure you want to close this position MASTEC INC?
By closing position, I’m notifying VIC Members that at today’s market price, I no longer am recommending this position.
Are you sure you want to Flag this idea MASTEC INC for removal?
Flagging an idea indicates that the idea does not meet the standards of the club and you believe it should be removed from the site. Once a threshold has been reached the idea will be removed.
You currently do not have message posting privilages, there are 1 way you can get the privilage.
Apply for or reactivate your full membership
You can apply for full membership by submitting an investment idea of your own. Or if you are in reactivation status, you need to reactivate your full membership.
What is wrong with message, "".