Quanta Services is the IBD Stock Of The Day as the energy infrastructure contractor nears a buy point. PWR stock's relative strength is also trending higher after shares found key support in October.
The company provides engineering and construction services to the electric power, renewable energy, oil and gas, and communication industries. The company is poised to benefit from a trifecta of industry and government spending initiatives: accelerated capital spending by utilities, the expansion of 5G services and rural broadband, and the 2021 federal infrastructure spending bill.
In addition, energy and energy-related stocks are riding high as inflation continues to drive up prices and the Russia-Ukraine war drags on. Several energy plays can be found on IBD Leaderboard and the IBD 50 list of top growth stocks.
Quanta stock can sometimes be found on the Big Cap 20 list.
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Infrastructure Bill, Inflation Reduction Act
The Stock Checkup tool shows that PWR stock is highly rated by IBD in terms of key ratings. It earns a 96 IBD Composite Rating, 92 RS Rating, and a 98 EPS Rating, all out of a best-possible 99.
Wall Street also likes this infrastructure stock, with a consensus rating of overweight from 16 analysts.
Quanta should benefit from the bipartisan $1 trillion infrastructure bill, passed in 2021. Its renewable energy unit should especially benefit from the Inflation Reduction Act of 2022, which includes various clean energy incentives and provisions.
PWR Stock, Construction Stocks
Shares of Quanta Services rose 0.6% to 141.97 on the stock market today. PWR stock has shaped a cup base after rebounding from support at its 200-day/40-week moving average around mid-October. A 5.8% surge last week saw it reclaim the 50-day/10-week line.
The construction stock's relative strength line has rebounded along with the share price, making a new high on the weekly MarketSmith chart, marked by a blue dot at the end of that line. A rising RS line shows outperformance vs. the S&P 500.
For October, Quanta stock notched a 10.6% gain and is trading below the cup base's 149.43 buy point. It is possibly forming a lower, handle entry, a dime above its Oct. 26 high of 144.31.
The heavy construction industry group ranks No. 66 out of 197 groups tracked by IBD. Quanta holds the highest EPS rating and fourth-highest RS Rating in this group.
A 92 Relative Strength Rating means that PWR stock has outperformed 92% of all stocks in IBD's database over the past year.
In terms of the RS Rating, Quanta trails a 99 for Hill International, 96 for Fluor and a 93 for Construction Partners. It is ahead of a 90 for Sterling Infrastructure and 84 for KBR.
Several of those construction stocks are also near buy points, with their RS lines making new highs.
Quanta Services Earnings
Quanta Services broke out on July 28 on strong second-quarter earnings. It's due to report for Q3 on Thursday before the market opens.
On Aug. 4, the company delivered outstanding results for the June quarter, growing earnings 45% and sales 41%, both on a year-over-year basis. It also maintained full-year guidance.
In an earnings release, Quanta Services said its customers are modernizing utility infrastructure, while moving toward a lower-carbon footprint, driving demand for its services and incremental growth opportunities.
"Notably, we are seeing growing demand for our renewable generation and infrastructure solutions in 2023 and beyond, giving us continued confidence in our multiyear financial targets," Quanta Services CEO Duke Austin said in the Aug. 4 release.
Over the past three quarters, Quanta earnings growth ranged from 26% to 65%. Analysts polled by FactSet are now forecasting 28% EPS growth for the full year on a 29% revenue gain.
This top construction stock generates 59% of revenue through its Electric Power segment. The Underground Utility and Infrastructure Solutions segment accounts for 27% of revenue and its new Renewable Energy segment for 14%, FactSet shows.
