Bernstein: Quanta Services: Grid and data center demand drives growth as margins begin to expand

Where did third-quarter growth come from?

Quanta Services’ total revenue grew organically by approximately 40% year over year in the third quarter. Electric power infrastructure grew organically by approximately 40%, while underground utility and infrastructure grew by approximately 30%.
The company raised its growth guidance for its electric power business: grid growth from approximately 23% to approximately 28%, and technology and load center growth from approximately 230% to approximately 270%. The latter consists primarily of data centers. Bernstein said third-quarter results were approximately 20% above market expectations.

Backlog grew approximately 60% year over year in the third quarter, and new orders were 1.9 times revenue for the period. The company said most of its capacity for 2028 is already committed, discussions have begun on projects for 2030 through 2031, and it currently sees no significant delays in data center projects.
The company won a NiSource power plant project; the related transmission-line portion remains to be secured. Bernstein expects opportunities to award 765-kilovolt projects in the first half of 2027 in Texas, Ohio and the MISO region.

The electric power infrastructure business’s operating margin rose 1.2 percentage points year over year to 12.6% in the third quarter. Bernstein believes the construction workers recruited in large numbers previously have become more productive after training and are beginning to generate operating leverage; the company’s skilled workforce has increased approximately 35% year to date.
Mechanical, electrical and plumbing (MEP) work accounts for approximately 15%–20% of the company’s business. It is growing faster than the company overall and has higher margins; the renewable energy business also provides support.
However, Bernstein’s model projects that the company’s overall adjusted operating margin will fall from 10.7% in 2026 to 10.4% in 2027. The quarterly margin improvement in the electric power business and the full-year forecast for the company overall are different measures.

Bernstein raised its adjusted earnings per share forecast for 2026 from 16.70 dollars to 18.23 dollars, and its forecast for 2027 from 20.77 dollars to 21.37 dollars. The firm expects earnings per share of 5.24 dollars in the fourth quarter of 2026, 8% above market expectations; its 2027 forecast is 5% above market expectations.
Bernstein maintained its Outperform rating and raised its price target from 775 dollars to 804 dollars. The target is based on approximately 28 times forecast earnings per share for 2030, discounted back to the present.