HOUSTON - Quanta Services , Inc. (NYSE: NYSE:PWR) has finalized the acquisition of Cupertino Electric, Inc. (CEI), a prominent provider of electrical infrastructure solutions, for approximately $1.54 billion. The transaction, which closed on Wednesday, adds CEI's expertise in the technology, renewable energy, and commercial sectors to Quanta's portfolio.
CEI, founded in 1954 and based in San Jose, California, is recognized for its integrated turnkey solutions, including engineering, procurement, and construction services. The company has established itself as a key player in the design and installation of electrical systems for large-scale data centers and has a significant presence in the mid-sized utility-scale solar and battery storage market.
The acquisition is expected to be immediately accretive to Quanta's growth, cash flow conversion, and earnings per share, excluding expected synergies. Quanta projects that CEI will contribute $1.0 billion to $1.1 billion in revenues and $80 million to $90 million in adjusted EBITDA for the remainder of 2024.
For the full year of 2025, the estimated contributions are $2.325 billion to $2.425 billion in revenues, $175 million to $195 million in adjusted EBITDA, and $0.40 to $0.50 in adjusted diluted earnings per share.
Quanta's President and CEO, Duke Austin, expressed enthusiasm for the acquisition, highlighting CEI's management team and workforce as complementary to Quanta's culture. CEI's President and CEO, Tom Schott (ETR:1SXP), will continue to lead the company, maintaining its management team and workforce of approximately 4,300 employees.
The acquisition aligns with Quanta's strategic goals, offering a platform for growth across various verticals that are driving electricity demand and the energy transition. It also enhances Quanta's exposure to the technology industry, a market of critical infrastructure requiring comprehensive power solutions.
The consideration for the deal included approximately $1.3 billion in cash, subject to adjustments, and around 883,000 shares of Quanta common stock valued at about $225 million. There is also a potential earnout payment of up to $200 million based on the achievement of certain financial targets.
Quanta funded the cash portion of the transaction with cash on hand, drawings under its existing credit facility, and a short-term term loan facility. Legal advisory for Quanta was provided by King & Spalding LLP, while Lazard (NYSE:LAZ) acted as the exclusive financial advisor to CEI, with Fenwick & West LLP serving as legal advisor.
This news is based on a press release statement from Quanta Services, Inc.
In other recent news, Quanta Services has seen a flurry of activity. Argus has raised the company's share target to $310, maintaining its Buy rating, based on Quanta's substantial backlog of $2.9 billion, an indicator of future revenue potential. The company's expansion of 5G services, rural broadband, and aggressive acquisition strategy have also been highlighted as key growth factors.
DA Davidson also raised its price target for Quanta Services from $225 to $250, maintaining a neutral stance, despite a slower pace of bookings for the quarter. Evercore ISI increased its price target for Quanta Services to $288 from $255, citing the company's potential for sustained growth amid ongoing energy transitions.
In addition to these developments, Quanta Services has announced the addition of two new independent directors to its Board of Directors. Warner L. Baxter (NYSE:BAX) and Jo-ann dePass Olsovsky, with their vast experience in the utilities and technology sectors, are expected to bring valuable industry insights to the company.
Quanta Services has also declared a quarterly cash dividend of $0.09 per share, reflecting the company's consistent ability to generate steady cash flows.
InvestingPro Insights
Quanta Services, Inc. (NYSE: PWR) has made a significant stride with the acquisition of Cupertino Electric, Inc. (CEI), which is anticipated to bolster its financials and strategic positioning. As investors evaluate the potential impact of this acquisition on Quanta's market performance, several key metrics and insights from InvestingPro offer a clearer picture of the company's standing.
InvestingPro data highlights a robust revenue growth for Quanta, with the last twelve months as of Q1 2024 showing a 22.51% increase. This is complemented by a solid revenue projection for the remainder of 2024, following the CEI acquisition. Additionally, Quanta's P/E Ratio is currently at 50.3, indicating a high earnings multiple, which could reflect market expectations of future earnings growth.
Despite a challenging period over the last month, where the stock has seen a 12.86% decline in price total return, Quanta's long-term performance remains strong, with a high return over the last decade. This suggests resilience and the potential for recovery. Furthermore, the company's position as a prominent player in the Construction & Engineering industry, according to an InvestingPro Tip, supports the strategic significance of the CEI acquisition in expanding Quanta's service offerings and market reach.
Investors looking to delve deeper into Quanta's financials and market predictions can find additional InvestingPro Tips at https://www.investing.com/pro/PWR. Currently, there are 13 more tips available, offering comprehensive insights. For those considering an InvestingPro subscription, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, enhancing your investment research with valuable data and analysis.
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