Zacks_Analysts' Blog : Quanta Services Wins Contract - Analyst Blog

Quanta Services Inc. (PWR) through its subsidiaries, Sunesys, LLC and Blair Park Services LLC, won an approximately $118.5 million designing and installation contract for fiber optic network in Pennsylvania. The project is being coordinated by a non-profit corporation called the Keystone Initiative for Network Based Education and Research (KINBER). KINBER is a group of Pennsylvania colleges and universities, research and health care organizations and economic development entities.

The motive of the project is to enhance the education, healthcare, research and workforce training and development system of the state through the Pennsylvania Research and Education Network (PennREN), the sixth largest broadband stimulus project in the country. PennREN will cover a distance of 1,600 miles through 39 countries.

KINBER believes resources from Quanta Services and the experience of Sunesys and Blair Park in Pennsylvania will aid in accomplishment of its goal. A grant of $99.6 million has been received by KINBER from the National Telecommunications and Information Administration, as part of the American Recovery and Reinvestment Act, for the project.

As per the contract, Quanta, through Sunesys, will be investing $24 million in the project, in lieu of which it will get certain rights of access on the PennREN network. Construction work of the project is expected to be completed by January 2013.

Quanta Services Inc. is a leading national provider of specialty contracting services, and is one of the largest contractors serving the transmission and distribution sector of the North American electric utility industry. The company has four reportable segments: (1) Electric Power Infrastructure Services, (2) Natural Gas and Pipeline Infrastructure Services, (3) Telecommunications Infrastructure Services and (4) Fiber Optic Licensing.

As a result of its nationwide operations and significant scale, Quanta Services is able to deploy services to customers across the United States. This capability is particularly important to customers, who operate networks that span multiple states or regions. The scale of its operations also allows it to mobilize significant numbers of employees on short notice for emergency restoration services. 

However, the company’s customers and demand for its services continue to be negatively affected by the generally slow economy. The company has pursued its strategy of avoiding low-margin work. Major competitors of Quanta Services are EMCOR Group Inc. (EME), Integrated Electrical Services Inc. (IESC) and MYR Group Inc. (MYRG).

We continue to maintain an Underperform rating on Quanta Services for the long term. The company has a Zacks #4 Rank (Sell recommendation) over the next one-to-three months.