Quanta (PWR)

Infrastructure solutions provider Quanta (NYSE:PWR) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 17.5% year on year to $7.63 billion. The company’s full-year revenue guidance of $28 billion at the midpoint came in 0.9% above analysts’ estimates. Its non-GAAP profit of $3.33 per share was 2.2% above analysts’ consensus estimates.

Company Overview

A construction engineering services company, Quanta (NYSE:PWR) provides infrastructure solutions to a variety of sectors, including energy and communications.

Areas like the energy transition and emission reduction are thematic and front of mind today. This can be a double-edged sword for the energy products and services industry. Those who innovate and build new expertise can jolt demand while those who cling to legacy technologies or fall behind in the trending areas could see their market shares diminish. Bigger picture, energy products and services companies are still at the whim of construction and infrastructure project volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates.

Quanta’s top competitors include MasTec (NYSE:MTZ), Dycom Industries (NYSE:DY), and MYR Group (NASDAQ:MYRG).

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Quanta’s sales grew at an incredible 19% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Quanta’s annualized revenue growth of 18% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Quanta’s backlog reached $39.2 billion in the latest quarter and averaged 16.7% year-on-year growth over the last two years. Because this number is in line with its revenue growth, we can see the company effectively balanced its new order intake and fulfillment processes.

This quarter, Quanta reported year-on-year revenue growth of 17.5%, and its $7.63 billion of revenue exceeded Wall Street’s estimates by 2.8%.

Looking ahead, sell-side analysts expect revenue to grow 11.6% over the next 12 months, a deceleration versus the last two years. We still think its growth trajectory is attractive given its scale and implies the market is baking in success for its products and services.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Quanta has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 14.7% gross margin over the last five years. Said differently, Quanta had to pay a chunky $85.27 to its suppliers for every $100 in revenue.

This quarter, Quanta’s gross profit margin was 15.9%, in line with the same quarter last year. Zooming out, Quanta’s full-year margin has been trending up over the past 12 months, increasing by 1 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Quanta’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 5.4% over the last five years. This profitability was paltry for an industrials business and caused by its suboptimal cost structureand low gross margin.

Looking at the trend in its profitability, Quanta’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Quanta generated an operating margin profit margin of 6.8%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Quanta’s EPS grew at an astounding 24.4% compounded annual growth rate over the last five years, higher than its 19% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Quanta, its two-year annual EPS growth of 24.3% is similar to its five-year trend, implying strong and stable earnings power.

In Q3, Quanta reported adjusted EPS of $3.33, up from $2.72 in the same quarter last year. This print beat analysts’ estimates by 2.2%. Over the next 12 months, Wall Street expects Quanta’s full-year EPS of $10.53 to grow 14.6%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Quanta has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.8%, subpar for an industrials business.

Taking a step back, an encouraging sign is that Quanta’s margin expanded by 1.9 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat.

Quanta’s free cash flow clocked in at $421 million in Q3, equivalent to a 5.5% margin. The company’s cash profitability regressed as it was 2.8 percentage points lower than in the same quarter last year, but we wouldn’t put too much weight on it because capital expenditures can be seasonal and companies often stockpile inventory in anticipation of higher demand, causing quarter-to-quarter swings. Long-term trends trump fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Quanta has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.9%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Quanta’s ROIC increased by 2.2 percentage points annually over the last few years. its rising ROIC is a good sign and could suggest its competitive advantage or profitable growth opportunities are expanding.

Quanta reported $610.4 million of cash and $6.02 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.77 billion of EBITDA over the last 12 months, we view Quanta’s 2.0× net-debt-to-EBITDA ratio as safe. We also see its $80.94 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Quanta blew past analysts’ backlog expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Overall, we think this was still a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 1.3% to $443 immediately following the results.

Updated: December 4, 2025 at 9:08 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Quanta, you should also grasp the company’s longer-term business quality and valuation.

There is a lot to like about Quanta. For starters, its revenue growth was exceptional over the last five years. And while its low gross margins indicate some combination of competitive pressures and high production costs, its backlog growth has been marvelous. On top of that, Quanta’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Quanta’s P/E ratio based on the next 12 months is 37.9x. This multiple isn’t necessarily cheap, but we’ll happily own Quanta as its fundamentals shine bright. Investments like this should be held patiently for at least three to five years as they benefit from the power of long-term compounding, which more than makes up for any short-term price volatility that comes with relatively high valuations.

Wall Street analysts have a consensus one-year price target of $474.38 on the company (compared to the current share price of $464.05).