Wednesday's IBD 50 Stocks To Watch pick, Quanta Services, continues to rebound from a key level during ongoing stock market volatility, with a new base forming. PWR stock boasts a relative strength line at new highs, as the stock rose 0.9% midday Wednesday.
Quanta provides engineering and construction services to the electric power, renewable energy, oil and gas, and communication industries. It is poised to benefit from a trifecta of industry and government spending initiatives: accelerated capital spending by utilities, the expansion of 5G and rural broadband, and the 2021 federal infrastructure spending bill.
On Feb. 23, the solar energy-powered ESG leader reported better-than-expected Q4 top and bottom lines, earning $1.68 per share on sales of $4.416 billion. Earnings rose 9% on a year-over-year basis while sales climbed 13%.
Baird analyst Justin Hauke reiterated his outperform rating on Quanta stock after the report, posting a 12-month price target of 173, up from 157. He noted that expectations are high but Q4 results saw most metrics come in solidly-above consensus expectations, driven by an impressive backlog.
Impressive ESG And Solar Energy Stock Metrics
This infrastructure leader has a solid 94 out of a perfect 99 Earnings Per Share Rating, according to IBD Stock Checkup. The EPS Rating takes into account the growth and stability of earnings over the past three years, with the two most recent quarters weighed more heavily in the calculation.
Quanta also has an impressive long-term earnings track record, with a solid 26% five-year growth rate. While that positively impacts the EPS Rating, single-digit earnings growth in the latest quarter depresses the rating.
Looking forward, annual earnings are expected to grow 11% in 2023 and 14% in 2024, according to FactSet.
As for the SMR Rating — which looks at sales, profit margins and return on equity — Quanta has a strong "B" rating. In the latest year, it booked a mild 7% pretax margin, with a solid 18% return on equity. And over the last three quarters, Rambus has grown sales by an average 29%.
Finally, PWR stock shows a top-draw 93 out of a perfect 99 IBD Composite Rating. This proprietary metric is designed to help investors easily measure the quality of a stock's fundamental and technical metrics.
Stocks To Watch: Quanta Eyes Buy Point
Quanta shares rose 0.8% Wednesday, rebounding further from their key 50-day support level, according to IBD MarketSmith chart analysis. In recent weeks, shares also found support around their 153.67 cup-with-handle entry.
Meanwhile, a new flat base is close to forming this week, which will offer a potential entry at 168.85. But keep in mind the market correction should keep investors on the sidelines until a follow-through day signals the start of new uptrend.
Bullishly, the relative strength line hit a new high this week, exhibiting big outperformance vs. the S&P 500. An RS line at new highs confirms that Quanta is a top stock to watch in today's stock market.
Other IBD 50 Stocks To Watch
These are three recent IBD 50 Stocks To Watch picks.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| Rambus | 46.26 | Flat base | |
| Vertex Pharmaceuticals | 325.29 | Cup base | |
| Workday | 193.74 | Flat base |
Source: IBD Data As Of March 29, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on top stocks to buy and watch and the stock market.
