On Friday, Baird maintained its positive stance on Quanta Services (NYSE:PWR), raising the stock's price target to $320 from $288. The firm's analyst adjusted the third and fourth quarter 2024 Renewables segment margin estimates to align with the guidance provided by Quanta Services' management.
The revised price target reflects a bullish outlook on the company, influenced by recent market gains, lower interest rates, and growing demand driven by advancements in artificial intelligence. The new target is based on a 21 times forward twelve-month EBITDA multiple, which is in line with current trading levels and reflects the premium associated with the stock and sector due to strong fundamentals in electrification and supportive funding and policy environment.
The analyst's adjustments came after recognizing that the company's management expects a sequential improvement in margins from the second quarter of 2024, contrary to the historical pattern where third-quarter margins typically surpassed those in the fourth quarter. This change in trend is a key factor in the updated margin projections.
Despite these quarterly adjustments, Baird has not altered its full-year estimates for Quanta Services for the years 2024 and 2025. The firm's outlook remains consistent, expecting the company to continue benefiting from the sector's strong intermediate-term fundamentals.
The price target increase is a reflection of the recent positive performance in the market and specific sectors, spurred by the macroeconomic factors such as lower interest rates. Additionally, the heightened interest in AI-driven demand has been identified as a contributing factor to the company's growth prospects.
In other recent news, Quanta Services has been demonstrating strong financial performance, with Q2 revenues reported at $5.6 billion and a net income attributable to common stock of $188.2 million. The company has issued $1.25 billion in senior unsecured notes, further solidifying its financial position. In a strategic move, Quanta Services acquired Cupertino Electric, Inc. (CEI), with analysts at DA Davidson estimating this acquisition will contribute approximately 9% of the company's total revenue by 2025.
Analysts from various firms have offered their perspectives on Quanta Services' prospects. Citi reaffirmed its Buy rating on the company, expressing optimism about its success in the Transmission & Distribution and renewable sectors. TD Cowen and DA Davidson have raised Quanta's stock target, reflecting the integration of CEI into the company's financial outlook. In contrast, Jefferies gave Quanta Services a Hold rating, citing its premium valuation compared to competitors.
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