What: Shares of electric industry contractor MasTec, Inc. fell 11% on Friday after one of its competitors reported weaker-than-expected earnings.
So what: MasTec's move today wasn't a reaction to anything the company itself did or announced. Instead, it was a reaction to very weak earnings from Quanta Services, MasTec's larger competitor that usually does work on large transmission projects.
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Quanta's third-quarter earnings were slightly below expectations, but fourth-quarter earnings-per-share guidance was reduced from $0.34-$0.40 to a range of $0.22-$0.24. Management blamed the weak guidance onincreased competition from smaller rivals on small transmission projects. They said that projects are being delayed across the country, and in an effort to keep crews and equipment busy, smaller rivals -- like MasTec -- are bidding aggressively on new transmission projects.
Now what: While Quanta's earnings announcement isn't necessarily bad for MasTec, it isn't a good omen, especially when you consider the company's declining revenue and earnings loss in the second quarter.
Management should be reporting third-quarter earnings in late October, so investors should watch for signs that competition in the transmission space is indeed increasing, squeezing margins, as Quanta said. If that's the case, the rest of 2015 could be rough for MasTec's operations.
The article Why MasTec, Inc.'s Shares Dropped 11% Today originally appeared on Fool.com.
Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends MasTec. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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