MasTec Stock is Trading at a Premium Than the Industry: Buy or Fold?

MasTec, Inc. MTZ is currently trading at a forward 12-month Price/Earnings ratio (P/E F12M) of 22.06, a roughly 25.2% premium to the Zacks Building Products - Heavy Construction industry average of 17.62, and higher than its five-year median.This Coral Gables, FL-based leading infrastructure construction company’s solid backlog, strong financial management and focus on high-growth sectors like clean energy and communications provide a strong foundation for growth. Yet, the company’s relatively expensive valuation raises concerns about whether the stock's valuation is justified, given the potential impacts of policy changes proposed by President Donald Trump. Image Source: Zacks Investment ResearchMTZ stock appears overvalued, especially when compared to other peer companies like AECOM ACM, Fluor Corporation FLR and EMCOR Group, Inc. EME, all lower than MasTec. ACM, FLR and EME have a forward P/E of 17.66, 14.93 and 17.29, respectively.MasTec Stock Outperforms IndustryConsidering the share price performance, MTZ stock has dropped 5.5% so far this year amid macroeconomic concerns related to Trump’s policy changes, tariff imposition and high inflation. This compares with the broader Construction sector’s 4.9% drop and the Zacks S&P 500 Composite’s decline of 2.4% in the same period.Nonetheless, MTZ stock has outperformed the industry, and its Value Score of B suggests that it is a strong value proposition at current levels.MasTec’s YTD Price PerformanceImage Source: Zacks Investment ResearchMasTec stock is trading above its 200-day simple moving average (SMA), indicating solid long-term momentum. However, it is below its 50-day SMA, reflecting near-term volatility. Image Source: Zacks Investment ResearchLet’s discuss MasTec’s potential tailwinds that can drive the stock higher in the near term.Decoding MasTec’s TailwindsTrump’s "National Energy Emergency" & "Unleashing American Energy": President Donald Trump's energy policies, summarized by "Unleashing American Energy" and the "National Energy Emergency," represent a significant shift toward prioritizing fossil fuel expansion, deregulation and energy independence. Political discussions around energy security and grid reliability have intensified, adding urgency to these projects. This highlights the bipartisan push for infrastructure upgrades. MasTec’s positioning as a key contractor for power grid development enabled it to capitalize on these trends, securing long-term contracts that will support continued revenue expansion.Utilities across the United States are increasing capital spending on transmission lines, substations and distribution networks to handle growing energy demand. A combination of federal incentives, regulatory support and corporate investments in renewable energy integration further strengthened the sector’s growth trajectory, benefiting MasTec.Growing Demand for Data Centers: The accelerating expansion of data centers is emerging as a key growth driver, boosting demand for power infrastructure and fiber connectivity. MasTec has already secured more than $200 million in data center-related revenues in 2024, with expectations for further growth in 2025. The surge in artificial intelligence, cloud computing and high-performance data storage is fueling substantial investments in new facilities, each requiring extensive electrical and fiber-optic infrastructure. As companies push for swift digital infrastructure deployment, MasTec is well-positioned to capitalize on this trend.Bullish About Pipeline Business: While most of MasTec’s business segments showed strong growth, the Pipeline Infrastructure division faced headwinds in the fourth quarter of 2024. Despite the short-term slowdown, MasTec is optimistic about the long-term prospects of this business. The demand for gas-fired power generation is rising, leading to an increased need for natural gas pipelines. The company expects pipeline revenues in 2026 to exceed 2024 levels as new projects come online. With Trump’s policies favoring fossil fuel expansion, such as approving pipelines and increasing domestic drilling, MasTec could see heightened demand for pipeline construction, processing facilities and maintenance contracts.Solid Backlog Growth: MasTec ended the fourth quarter of 2024 with an 18-month backlog of $14.3 billion, a record high for the company. The backlog increased sequentially in every segment, reflecting strong customer demand and a robust project pipeline heading into 2025. The ability to secure new contracts across multiple infrastructure verticals has reinforced MasTec’s long-term growth potential.Decoding MasTec’s HeadwindsMasTec operates in highly volatile sectors that are deeply exposed to political and regulatory uncertainty. The company has relied heavily on government-backed infrastructure spending, particularly in broadband expansion, renewable energy and power grid upgrades. However, any shift in political priorities could pose significant threats to its business.The Clean Energy and Infrastructure segment faces growing uncertainty due to potential rollbacks in federal energy policies, especially regarding renewable energy incentives. While the Inflation Reduction Act (“IRA”) has fueled investments, ongoing political debates about its future could disrupt the momentum of MasTec’s projects.In the pipeline sector, regulatory hurdles remain a persistent obstacle. Environmental opposition and permitting bottlenecks continue to stall new projects, leading to revenue instability. Although MasTec anticipates increased pipeline demand by 2026, the company must first contend with a difficult and unpredictable regulatory landscape that could further constrain its growth.Estimates for MasTec’s EPS & Analyst SentimentEstimate revision remains mixed for MasTec’s 2025 earnings per share (EPS). Over the past 60 days, earnings estimates for 2025 have been revised upward to $5.53 (from $5.40), but it shows a downward trend over the past seven days from $5.57.Nonetheless, analysts still expect its EPS to grow a solid 40% year over year in 2025, as shown below. This suggests the company’s profitability trajectory remains intact despite near-term headwinds.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Image Source: Zacks Investment ResearchAnalysts are Bullish on MasTec StockAnalysts are optimistic about MasTec. Out of 14 recommendations contributing to the company’s Average Brokerage Recommendation (“ABR”), 12 have rated the stock as a Strong Buy, leading to an impressive ABR of 1.29 (representing 85.7% of all recommendations). A month ago, Strong Buy represented 84.6%. Wall Street’s average price target for MTZ stock is $166.21 per share, implying a potential upside of 26.2% from recent levels.Should You Buy, Sell or Hold MTZ Stock?MasTec presents a mix of strong growth potential and valuation concerns. While its solid backlog, data center expansion and infrastructure investments make it an attractive long-term prospect, the stock’s premium valuation and regulatory risks warrant caution. With a Zacks Rank #3 (Hold), investors should carefully evaluate market conditions and potential policy shifts before making a decisive move on MTZ stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fluor Corporation (FLR): Free Stock Analysis Report AECOM (ACM): Free Stock Analysis Report EMCOR Group, Inc. (EME): Free Stock Analysis Report MasTec, Inc. (MTZ): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks