Discover the Outstanding Infrastructure Investment Option Essential for Sustaining the colossal $3 trillion Phenomenon
The shift towards less carbon-emitting energy sources will necessitate substantial financial commitments. As per Goldman Sachs' estimations, the globe needs to invest around $3 trillion annually until the end of the decade to accomplish its objectives of achieving net-zero carbon emissions in the upcoming decades. This gigantic investment extends to various sectors such as renewable energy, power grids, and increased electrification.
A pivotal company in constructing this infrastructure is Quanta Services (-2.26% in PWR). Known as the leader in offering specialized infrastructure solutions, let's delve deeper into this essential infrastructure stock.
Exploring Quanta Services
Quanta Services offers specialized infrastructure services to utilities, renewable energy, technology, communication, pipeline, and energy industries. Its clientele boasts industry heavyweights like Duke Energy, NextEra Energy (-0.36%), Verizon, and Enbridge**. Quanta Services assists these companies in designing, installing, repairing, and maintaining their infrastructure systems.
Though its services encompass numerous infrastructure aspects, approximately three-quarters of its revenues derive from utilities and renewable energy developers. This alignment puts Quanta Services in an advantageous position to capitalize on the expanding total addressable market for infrastructure associated with the transition towards less carbon-emitting energy sources.
For instance, U.S. investor-owned electric utilities, such as Duke Energy and NextEra Energy, anticipate spending $186.4 billion on upkeep and expansion of their electricity transmission and distribution systems, as well as power-generating capabilities, this very year. They will allocate $51 billion for power-generation projects, with 65% of that capital earmarked for renewable energy.
The aforementioned figure is predicted to surge substantially in the upcoming years. Experts project the U.S. to implement 375-450 GW of new renewable and storage capacity in the ensuing seven years. This represents a substantial increase compared to the 140 GW that the country received in the previous seven years.
Companies like NextEra Energy are driving this momentum (planning to amplify its renewable and storage capacity from 38 GW at present to 81 GW by 2027). NextEra Energy, in addition, is investing capital to construct transmission lines and to grow its electric utility operations in Florida.
This is only one opportunity in one country. Quanta Services operates across multiple industries and countries, offering clients an expanding range of services.
The excellent performance is expected to persist
Increased infrastructure investment is powering robust growth for Quanta Services in the current year. It boasted another quarter of double-digit growth in the third quarter. Its revenue climbed from $5.6 billion to $6.5 billion, while its adjusted earnings soared from $2.24 per share to $2.72. Moreover, it generated $539.5 million in cash flow, amassing nearly $1.4 billion in cash flow to date (with almost $980 million in free cash). The strong performance has catalyzed a more than 50% surge in its stock price this year.
Quanta Services is well-positioned to continue expanding. It closed the third quarter with a record $34 billion worth of projects in its pipeline. This gives the company confidence in its sustained growth. "We believe that we are well-positioned to achieve another year of double-digit earnings-per-share growth in 2025 due to increasing demand for our services, strong execution of our strategic plan, and capital deployment opportunities," stated CEO Duke Austin in the third-quarter earnings press release.
The company has been augmenting its abilities to continue growing and capturing a greater share of the enormous opportunity that it sees ahead in energy transition investments. Quanta has completed several acquisitions and investments to bolster its capabilities in the recent past, including the acquisition of Cupertino Electric (a renowned electrical infrastructure solution provider) and making an investment in Hybar (a tech-savvy scrap metal recycling rebar mill).
Additionally, the company has allocated capital back into its business to catalyze further organic growth. The company envisions these investments enabling it to deliver consistent revenue and earnings growth in the long term.
A potential attractive investment avenue for this enormous trend
The world is projected to pour trillions of dollars into constructing lower-carbon energy infrastructure across the coming years. This trend aligns with Quanta Services's strengths, being a prominent provider of specialized infrastructure services to utilities and renewable energy developers. It should sustain healthy growth for the company, making it a potential intriguing investment for this colossal megatrend.
Given the global commitment to invest $3 trillion annually towards achieving net-zero carbon emissions, companies like Quanta Services, which offers infrastructure services to utilities and renewable energy developers, are well-positioned to benefit financially from this investing trend in the finance sector. With approximately three-quarters of its revenues derived from utilities and renewable energy developers, Quanta Services is poised to capitalize on the growing market for infrastructure associated with the shift towards less carbon-emitting energy sources.
