Monday, November 07, 2005

Mastec margins improving- read on Telco/cable spending

MTZ reported results after market and as I had pointed out earlier margins are starting to move up. Gross margins increased nicely from 11.4% to 14.8% sequentially, very tough to see margins increasing in this increasing cost environment. G&A expense was higher but operating margins improved as well. MTZ is a play on not only better spending by carriers on specific projects like FTTx, it's also a restructuring story that trades at a discount to DY. MTZ top line and EPS were better than expected but the guidance for next quarter looks really strong on bottom line even though weaker on top line which means margins will improve going into Q4 also.

Company also filed its 10Q and according to it there was only one customer accounting for 28.4% of total revenues were attributed to one customer instead of two customers accouting for 36.7% from two customers in previous customers. Company also disclosed revenues by industries for only three industries instead of four in June, the missing puzzle is from Energy. Conference call will be held tomorrow, look forward to listening about VZ, BLS, CMCSA spending plans as lower rev guidance suggests slowing down or just customer transition issues.


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