A Powerful Sandy Play

 | Nov 12, 2012 | 11:30 AM EST  | Comments
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I want to come back to a theme I wrote about last week involving a good infrastructure play that should be buoyed by the destruction caused by Hurricane Sandy. I outlined why I thought Tutor Perini (TPC) was already a cheap stock that should benefit from increased construction demand driven by the storm-recovery efforts. New York Governor Andrew Cuomo says that the storm damage in New York state will be at least $33 billion, and he will likely ask for $30 billion in federal aid to help recover from the disaster. Look for estimates for total storm damages to continue to climb, especially given the extensive destruction in New Jersey. I would not be surprised if the eventual tab for cleaning up and recovering from Sandy tops $100 billion.

One of the core components of the infrastructure that will need repair and modernization is the region's electrical grid system. Quanta Services (PWR) seems ideally positioned to benefit from this effort. It provides specialty-contracting services to the power industry. The company designs, installs and maintains electric power transmission and distribution networks, and substation facilities. It is more of a pure-play bet on the Sandy recovery and the stock has characteristics that should appeal to growth investors.

Four reasons PWR is a solid growth play at $26 a share:

  • Consensus earnings estimates for 2012 and 2013 have risen nicely since Sandy. Look for 2013 estimates to continue to rise over the coming weeks. Analysts should continue to factor in the additional revenue from the aftermath of the storm and the huge amount of recovery work that needs to be done.
  • Earnings for the company are on an impressive growth path. The company made just $0.69 cents per share in 2011, but it is on track to almost double that in full-year 2012. Current projections call for $1.60 per share in 2013, but that looks like a conservative estimate.
  • Revenue looks like it will increase about 35% in 2012 and the company should grow sales at least 10% in 2013. This could change as the estimates for Sandy continue to climb, and I would not be surprised of getting some sort of infrastructure bill out of Congress in 2013 to help modernize the grid system after the havoc caused by this storm. Obviously, this would be another catalyst to Quanta's growth.
  • The company has beaten earnings estimate for five straight quarters, and it raised guidance at its last quarterly earnings conference call. Analysts have also raised price targets on the stock at Credit Suisse and Stifel Nicolaus over the last couple of weeks. Look for more analysts to follow suit in the weeks ahead.

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