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MasTec: Lowering Our Financial Forecast; Shares Undervalued Following Recent Selloff

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Securities In This Article
MasTec Inc
(MTZ)

We lower our fair value estimate for no-moat MasTec MTZ to $86 per share from $103 after updating our financial expectations. The key driver of our lower valuation is lower revenue growth in the company’s Communications and Clean Energy and Infrastructure segments. We view MasTec shares as undervalued.

MasTec shares are down 46% from their early August highs as investors continue to digest the company’s second quarter earnings update. We believe investors are concerned with two items: further risks associated with the 2022 acquisition of Infrastructure and Energy Alternatives (IEA) and a slowdown in customer spending in the Communications segment. We acknowledge risk in these two areas and incorporate it into our revised financial expectations. Our revenue and Adjusted EBITDA expectations are now within 1-2% of consensus expectations in 2023 and 2024, but 5% and 12% below consensus in 2025 when we expect the Oil and Gas segment revenue to normalize at a lower level.

In sum, we believe a portion of the recent slide in shares is warranted by a lower fundamental outlook. However, the decline has been overdone, in our view, leaving shares trading at an attractive level.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Brett Castelli

Equity Analyst
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Brett Castelli is an equity analyst, energy and utilities, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. His coverage focuses on clean energy companies across renewables and emerging technologies.

Before joining Morningstar in 2021, Castelli spent more than eight years in various analyst roles for TortoiseEcofin, a boutique asset manager. His coverage focused on North America and included companies within traditional energy, electric utilities, and renewables. Additionally, he assisted with the firm's environmental, social, and governance efforts and played an important role in integrating ESG into the investment process. Castelli spent a year at the firm's London office following an acquisition.

Castelli holds a bachelor's degree in finance from the University of Missouri's Trulaske College of Business. He also holds the Chartered Financial Analyst® designation.

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