We have upgraded our recommendation from Neutral to Outperform on Quanta Services, Inc. (PWR). The company's third quarter 2012 results were encouraging, with earnings of 45 cents -- 25% ahead of the Zacks Consensus Estimate and 80% above the prior-year level.
Quanta's strengths include strong execution, increasing demand for its services and customer confidence in the company. Revenues from the electric power segment grew 32%, while the natural gas and pipeline segment continued to improve despite the lack of large-diameter pipeline projects.
Over the last five years, PWR's shares have traded in a range of 18.4x to 46.4x trailing 12-month earnings. Our target price is $32.00 or 20.4x 2013 EPS, which is well within the historical range.