Construction company MasTec (MTZ +1.08%) is being hit with delays on big clean-energy and infrastructure projects, and the costs associated with those projects are weighing on results. Shares of MasTec fell 22% on Wednesday after the company missed on earnings and cut its guidance for the full year.
Economic headwinds are putting new construction on ice
MasTec is an engineering and construction company focused on renewable energy generation, as well as communications, utility, and other infrastructure projects. The company earned $0.95 per share in the quarter on revenue of $3.26 billion, but that was well below the $1.87 per share on revenue of $3.76 billion that Wall Street had expected.
The issue, according to the company, is customer delays, especially in the clean energy and infrastructure segments, and MasTec's need to spend to maintain resources for when construction eventually begins. The company listed several reasons for delays, including interconnect-agreement lead times, supply chain issues, permitting delays, and uncertainty in tax equity funding.
MasTec said its oil and gas business has seen delays due to hiring challenges, and its communications and power delivery segment is facing deferrals due to higher financing costs.
The issues will significantly hurt full-year profitability. MasTec now expects to earn $1.75 per share in 2023, down from previous guidance for $3.75 to $4.19 per share in earnings and well short of the $3.76 analysts had expected.
CEO Jose Mas said: "While we are disappointed in our anticipated performance for the second half of 2023, we believe our revised full year guidance fully captures the remaining near-term risks in our business. Despite our challenges and the headwinds we've faced in 2023, we continue to expect strong, although delayed, demand for our services."
NYSE: MTZ
Key Data Points
Is MasTec a buy after its big earnings miss?
Customer delays have been a recurring issue for MasTec this year, and the stock is now more than 60% below its highs for 2023. The delays are also going to prevent MasTec from reaching its deleveraging goal by year's end.
The good news is that MasTec still has a backlog of more than $12 billion in projects it expects to realize over the next 18 months.
Assuming the delays are temporary, and MasTec will eventually be able to bill for the work, the stock should be able to claw its way to previous levels and above in the quarters to come. But that could take time. Given the uncertainty, investors buying in now hoping for the best should be prepared for further volatility up ahead.
