MasTec Is Short-Circuiting

Shares of MasTec (NYSE: MTZ  ) hit a 52-week low recently. Let's look at how it got here and whether more clouds are ahead.

How it got here
Electrical contractor MasTec has had a rough go of it on the market recently, despite the company gaining more business in the past year. During the first quarter, revenue rose 26% to $778 million, but the results didn't trickle down to the bottom line and earnings per share actually fell from $0.26 a year ago to $0.17 last quarter. Full-year earnings-per-share guidance remained unchanged at $1.42.

The upgrading of our national grid was supposed to mean increased business for contractors like MasTec, Pike Electric (NYSE: PIKE  ) , Quanta Services (NYSE: PWR  ) , and Dycom Industries (NYSE: DY  ) . But the "smart grid" has been slow to make its way to utilities and an expansion of renewable energy production hasn't been followed by a sharp increase in transmission and distribution construction.

All of that has left stock prices languishing over the past year, as you can see below.

MTZ data by YCharts

The falling stock price may mean an opportunity for investors looking at MasTec. I agree with concerns over margins, but the company's forward P/E ratio is lower than competitors', growth is stronger, and I think this business will only get stronger as our grid ages.

Company	Price/Book	Return on Assets	Quarterly Revenue Growth	Forward P/E
MasTec	1.4	5.7%	25.9%	8.2
Dycom Industries	1.6	5.7%	17.3%	13.0
Pike Electric	1.0	3.3%	5.8%	16.5
Quanta Services	1.4	4.5%	67.9%	16.1

Source: Yahoo! Finance.

Compared to its competitors, MasTec doesn't look too bad, but will the stock rise anytime soon?

What's next?
The stock is likely to languish until management can prove the lower margins are a short-term phenomenon and not a long-term trend. In a business like this, margins can fluctuate on a single contract, so I'm not terribly concerned for the long term but I wouldn't rush out to buy shares now. Shares trade at less than 10 times management's earnings estimates for 2012, so I also see value emerging, especially if management can turn things around.

The CAPS community is a bit more ho-hum, giving the stock a three-star rating (out of five), and six All-Stars think the stock will underperform the market.

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