NEW YORK (TheStreet) -- Shares of Quanta Services Inc (PWR) are falling sharply, down 7.8% to $28.12 on heavy volume in midday trading Monday, after the contracting services company had its rating cut to "hold" from "buy" by analysts at BB&T Capital Markets this morning.
Analysts at the firm cited declining oil prices and the impact on earnings for its downgrade.
About 3.11 million shares of Quanta traded hands as of noon today, compared to its average trading volume of about 1.68 million shares a day.
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Houston, TX-based Quanta Services is a provider of specialty contracting services, providing infrastructure solutions to electric power and natural gas and oil pipeline industries.
Separately, TheStreet Ratings team rates QUANTA SERVICES INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate QUANTA SERVICES INC (PWR) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 32.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- PWR's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, PWR has a quick ratio of 1.79, which demonstrates the ability of the company to cover short-term liquidity needs.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Construction & Engineering industry average, but is less than that of the S&P 500. The net income increased by 1.9% when compared to the same quarter one year prior, going from $92.91 million to $94.65 million.
- QUANTA SERVICES INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, QUANTA SERVICES INC increased its bottom line by earning $1.87 versus $1.36 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus $1.87).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: PWR Ratings Report