TSC Ratings' Updates: Quanta

Net operating cash flow has declined marginally to $96.06 million, or 0.61% when compared with the same quarter last year. Despite a decrease in cash flow, Lincoln is still fairing well by exceeding its industry average cash flow growth rate of -15.08%. Shares are down 43.79% on the year, which is worse than the performance of the S&P 500. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

We've downgraded Quanta Services (PWR Quote), which offers end-to-end network solutions to the electric power, gas, telecommunications, cable television and specialty services industries, from buy to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.

Revenue leaped by 60.6% since the same quarter one year ago, exceeding the industry average growth rate of 32.6%, but EPS have declined. Quanta's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying very successful management of debt levels. Quanta also has a quick ratio of 1.57, which demonstrates the ability of the company to cover short-term liquidity needs. Its EPS from the most recent quarter came in slightly below the year-earlier quarter, but we feel Quanta is poised for EPS growth in the coming year. During the past fiscal year, it increased its bottom line by earning 88 cents vs. 11 cents in the prior year, and this year, the market expects an improvement in earnings to 89 cents.