Let’s start with three quotes because Duke deserves the spotlight…
“We’re trying to be a compounder of earnings and give good guidance for multi years and decades in fact.” – Earl ‘Duke’ Austin, CEO Quanta Services
“We’ll continue to buy great family companies. It made a huge difference in how we think about it. The culture and the company mean so much more than anything else. We start there and then does it fit the strategies next and then the financials will be after. As far as I’m concerned, we pay a nice, what I consider, multiple for a great company.” – Earl ‘Duke’ Austin
“I mean we performed very nicely for three decades in negative load growth.” – Earl ‘Duke’ Austin
Quanta (NYSE: PWR) generated records for quarterly revenue, adjusted EPS, and total backlog. Quanta’s revenue increased 17.6% and its adjusted EPS grew 22.4% year-over-year. Total backlog grew to $39.2 billion.
Quanta announced that NiSource engaged Quanta “for the design, procurement and construction execution of [natural gas power] generation and infrastructure resources capable of producing approximately 3 gigawatts of power for a large load customer.” The press release goes onto to say that “The scope of solutions to be provided by Quanta for this project includes power generation, battery energy storage, transmission, substation and underground infrastructure.”
Quanta has leading experience building transmission and distribution (T&D) and even experience building power generation derived from renewables and battery storage, but less experience specifically with combined cycle natural gas power generation plants. So, as part of this project, which includes constructing a combined cycle natural gas power generation plant, Quanta formed a 50/50 joint venture with Zachry Group to share in the complex project risk and because Zachry has more experience building natural gas power generation plants (Zachry has built over 100 gas-fired power plants across the U.S.). When you read Quanta’s earnings call transcripts, you’ll surely find that Duke Austin is always looking for ways to “de-risk” projects for Quanta’s clients and shareholders.
This is a major deal that showcases that Quanta is a turnkey electrical grid, renewables, and technology infrastructure solutions provider, and importantly, Quanta’s backlog of $39.2 billion “does not include a meaningful contribution from this project, but is expected to be recognized over multiple quarters going forward.” And during the call CEO Duke Austin listed several projects (or phases of projects) that are not yet in their backlog, saying that he expects to “stack” (grow) the backlog for “decades or more” in order “to be a consistent compounding earnings platform” for shareholders. As investors focused on the duration of per-share growth, that’s what we want to hear from our CEOs.
What gives Duke the confidence to talk about a decades-long growing backlog? The answer is that he thinks we are in the early stages of a “generational investment cycle in critical infrastructure” driven by the electrification of everything, re-industrialization (on shoring of critical manufacturing and supply chains), hardening and buildout of the electrical grid, transitioning (over time) to a renewables-based economy, and the buildout of AI mega-factories.
Following the strong quarter, Quanta again slightly raised its full-year 2025 guidance for revenue and free cash flow (FCF). It now expects revenue of $27.8 billion to $28.2 billion (up from $27.4 billion to $27.9 billion), FCF of $1.3 billion to $1.7 billion (up from $1.2 billion to $1.7 billion), and adjusted EPS of $10.33 to $10.83 (from $10.28 to $10.88). For adjusted EPS, you’ll notice that Quanta raised the low-end of the range, but lowered the high-end of the range, and kept the mid-point that same at $10.58.
Quanta generated $8.97 in adjusted EPS in 2024, so the mid-point of Quanta’s guidance for 2025 implies full-year EPS growth of 18%. Quanta’s guidance (at the mid-point) for 2025 also implies that full-year FCF will shrink by about 3% and that it will generate a full-year FCF margin of 5.4% and FCF conversion on GAAP net income of 146%.
The investment thesis for quanta, in my opinion, is straightforward: Quanta has an exceptional leader in Duke Austin, the company is a key asset to America, its business growth is supported (buoyed) by the regulated spend requirements of utilities as well as from the AI arms race and re-industrialization of America. Its adjusted EPS grew at around a 25% compounded annual growth rate (CAGR) over the last decade in a no-load-growth environment. So, it grew at super-normal rates when the industry did not grow. But now, Goldman Sachs estimates that $4 trillion will be spent on T&D through 2045 and $790 billion in electrical grid CapEx in the U.S. through 2030. The Edison Electric Institute estimates that EEI member utilities will spend $1.1 trillion on the U.S. grid from 2025-2029. Now that electrical load (demand) is expected to grow at around a 2% to 3% CAGR (a step function change from load growth of only 0% to 0.5%), I expect a very long runway of attractive EPS growth for Quanta going forward.
Earl “Duke” Austin was appointed CEO in 2016 and since then he has completely transitioned the company from being an electrical contractor (commoditized type of work with lower returns on equity) to a turnkey electrical grid, renewables, and technology infrastructure solutions provider. As a solutions provider Quanta handles all the project’s permitting, planning, design, engineering, construction, and even procurement and in-house manufacturing of transformers here in the U.S. This one-stop-shop solution adds more value to the client, creates client stickiness, and allows Quanta to grab higher wallet share so carries higher margins and returns on equity.
Duke also used acquisitions to expand the total addressable market (TAM), which further drove growth, margins, and returns. In other words, Duke architected a better business model and led efforts to build a moat around that business. This is not easy work, but Duke is a builder, and he did it, and I don’t think he’s even close to done. My analysis leads me to believe the moat is durable and growing wider at a time when Quanta’s services should be more in-demand than any time in recent history.
Additionally, most technology (and political leaders) are saying that the biggest bottlenecks to building out AI mega-factories even faster and realizing a real industrial renaissance in America are insufficient power infrastructure, including long distance, high-voltage transmission lines and transformers (some delayed 3 to 5 years) and a lack of skilled labor (it takes ten years to train a lineman and about 4 years to train an engineer to do lower-voltage work).
Well, Quanta is literally a solution to each of these bottlenecks, providing Quanta the best chance in the industry (in my opinion) of providing its clients with project execution certainty. According to Duke, “certainty” is Quanta’s value proposition…
Quanta is one of the leading electrical grid builders in the country. According to Goldman Sachs, it has built 50% of the transmission lines in the U.S. (well over 50% of the high voltage lines), and has 15% overall market share of T&D (transmission and distribution), and it has expanded its total addressable market organically and through acquisitions into building renewable assets (such as solar farms, wind farms, hydrogen pipelines, LNG, etc.), building out long-haul fiber, manufacturing transformers in the U.S., and even constructing data centers (with its recent acquisition of Cupertino Electric, a builder of data centers in the U.S.). Prior to the Cupertino acquisition, nearly all of Quanta’s work was performed outside or underground, but Cupertino brings them inside the facility (expanding into this very fast growth market).
Goldman Sachs estimates that barring substantial labor productivity improvements, the U.S. power industry will need over 500,000 new workers by 2030 and that if every single apprenticeship currently listed for the broader energy space by the Department of Labor all went to T&D, the U.S. would still be short 78,000 workers in T&D by 2030. Quanta has the most skilled, best trained, largest technical craft workforce in the industry (by far) because it trains them in-house at the trade-school college it acquired back in 2018. For this reason, it self-performs 85% of its work, which is a competitive advantage in the industry, because it means Quanta has the capacity to even take on the job, but also because it gives Quanta a better chance of getting the work done on budget and on time (“certainty”).
Quanta has vertically integrated through acquisitions to the point that it is now a leading manufacturer of transformers here in the U.S. Bernstein estimates that Quanta has 20% market share of domestically manufactured large transformers in the U.S.
Sources:
Key quotes from the call…
(note: bold and underline are my own)
“These results reflect accelerating demand in our electric segment, robust activity across our end markets, and positive momentum headed into 2026. They demonstrate the strength of our portfolio, the capability of our craft skilled workforce, and our ability to provide certainty through world-class execution as customers modernize and expand critical infrastructure. Our performance continues to be powered by Quanta’s core drivers: craft skilled labor, execution, certainty, and disciplined investment, which are critical to how we operate and create long-term value. Our craft workforce remains the foundation of our business, executing with safety, quality, and reliability across diverse infrastructure solutions. Execution certainty reinforces our reputation as a trusted partner capable of consistent, high-quality project delivery, and disciplined investment ensures capital is allocated toward opportunities that strengthen our platform, deepen customer relationships, and support sustainable growth. Quanta’s integrated solution-based model continues to differentiate our platform. By combining craft labor with engineering, technology, and program management expertise and critical supply chain capabilities, we deliver comprehensive self-perform solutions across the full infrastructure life cycle. This approach deepens customer partnerships and positions Quanta as a long-term collaborator, not a traditional contractor. Quanta operates at the center of a fundamental transformation in the energy and infrastructure sectors. The convergence of the utility, power generation, technology, and large load industries is driving increased demand for resilient grids, expanded generation and storage, and new infrastructure to support electrification, data centers, and domestic manufacturing. These structural drivers are fueling a generational investment cycle in critical infrastructure, and Quanta’s diversified, scalable platform is well positioned to capitalize on these opportunities.”
“Our Total Solutions power generation platform leverages these capabilities to address growing generation and infrastructure needs due to the rapidly increasing demand for electricity from data centers, manufacturing and reshoring, industrialization, electrification, and power grid expansion. This platform is focused on providing a fully integrated solution to high-quality customers for their generation development strategies. As a demonstration of this platform strength and scalability, NiSource has engaged Quanta for a design, procurement, and construction execution of generation and infrastructure resources capable of producing approximately 3 GW of power for a large load customer. This project highlights the strength of our Total Solutions platform spanning power generation, battery energy storage, transmission, substation, and underground infrastructure and underscores the value of our collaborative approach and builds on our relationship with NiSource and strong presence in Indiana.”
“We expect to achieve record backlog and another year of double-digit earnings per share growth in 2026. Our strategy remains focused on delivering certainty to customers, investing in talent and technology, and expanding our addressable markets through disciplined strategic growth.”
“We issued $1.5 billion of notes to recapitalize the balance sheet and enhance our liquidity position. Following the acquisition of Dynamic Systems, the interest rate on these notes was approximately 40 basis points lower than our issuance in the third quarter of 2024, reflecting the benefit of our recent ratings upgrade and the stability of our earnings outlook. This transaction reinforces our ability to support operations, maintain financial flexibility and deploy capital strategically while preserving our investment grade rating.”
“These dynamics, coupled with another quarter of record backlog, give us confidence in our ability to drive sustained revenue and earnings growth over the coming years. As we look toward 2026, the end market momentum and our consistent execution position us to deliver another year of double digit adjusted EPS growth and attractive returns.”
“We believe the opportunities ahead represent the next phase of a generational investment cycle in critical infrastructure and Quanta is well positioned to lead through it, delivering consistent performance, disciplined capital deployment and long-term value creation for our stakeholders.”
“I do believe you’re going to get in a period where you start stacking large projects on top of that base. And I’ve been consistent in that. You’re just now starting to see it go up. So I would expect the backlog to continue to increase. I would expect us to stack and continue to. Nor the power plant nor green belt is in our backlog and it will continue to stack. So at the larger projects, LNTPs, no 765 in there. I really like our chances of stacking this for decades or more. And we’re giving long-term growth profiles. We’re doing the things that we need to do to be a consistent compounding earnings platform.”
“We’re in a position where we can build basically the whole data center. We can build a generation behind it, all the way to rack. So I feel real comfortable with how we’ve positioned ourselves to take advantage of these opportunities.”
“I look at it like we’re listening to our customer and they’re asking us to expand our services. And I believe we’ve got the capabilities to do so. So we’re working with select customers on this and long-standing customers on power generation. I do think it’s a great business for the foreseeable future. Zachary was a great company, very much valued the same as us, know them well, know the family well, a great opportunity for us to work together on some things that they do better than us. And we have the capabilities internally to do everything so do they. We felt like this was a great venue for us in Indiana to work together to build this plant. Risk is always concerning me in these combined cycles. And I believe we’ve done a nice job here of working collaborative with the client. So I feel real comfortable with that. Yes, we can expand here. It can be a large, what I consider, opportunity for the company, and we’ll take advantage of it. But in select cases, I’m not going to get pressured to go sign up 10 combined cycles. It’s just not who we are and we’ll make sure that we limit ourselves to strategic partners and people that will collaborate with us on a total solution. This is a large program. It’s very much a solution for us. And I think we’ve done it the right way with the JV to mitigate some risk for the client and ourselves.”
“We’re trying to be a compounder of earnings and give good guidance for multi years and decades in fact.”
“Our renewable business hasn’t let up. We said it last quarter, I’ll say it again. It’s just LNTPs that are coming into FNTPs. Nothing new. I think we’re growing the business. Obviously, power is in need. And if you can build it faster with renewables and batteries, that’s what’s happening. The fastest thing in the market right now…The fact that we put in this, what I consider, as total solution now, it will continue. And I think backlog in the renewables side has been great. The inbounds are great. And I don’t think it’s pull-in, I think it’s just the normal course. And we’re seeing a nice market there. We continue to see it. Battery storage business is fantastic.”
“We’ve stayed in front of vertical supply chain. We don’t talk about that much, but I think we’ve done a really nice job of our vertical supply chain and what we can do with that. We continue to add there. I think we have probably 10 projects ongoing that are enhancing our vertical supply chain that doesn’t get talked about. From our standpoint, we’re filling the needs of the solution-based approach for our clients and we’ll continue to do so. We’re adding fabrication, we’re adding just about everywhere. It’s all strategic around the client. I would say we’re ahead in that and we’ll continue to buy great family companies. It made a huge difference in how we think about it. The culture and the company mean so much more than anything else. We start there and then does it fit the strategies next and then the financials will be after. As far as I’m concerned, we pay a nice, what I consider, multiple for a great company. You’ve seen us go from civil to transformers to other things. They all have a purpose and they all have a strategy. We’ll continue to leverage that strategy as we move forward in great markets that we have with technology and utilities.”
“We’ve invested in that craft-skilled workforce in our colleges and our campuses and everything we’ve done [ via ] curriculum. We can move that curriculum into all phases of craft. Now I mean we’re early in our technology piece, Cupertino acquisition was a great platform. That inside wireman like as far as I’m concerned, is scarce, it’s probably where you see scarcity. We’ve been able to add fabrication. We continue to add premanufacturing, let’s call it, premanufactured products that are allowing us to scale it. But I think that’s probably when I think through it, we’ll continue to beef that program up and add faster to our inside wireman. And now we’re in plumbing, mechanical all kinds of trades there from our mechanical business. So that’s next, and we’ll continue to add curriculum. Some kids don’t want to get in the air. And some of these businesses are more local than others. So on our high voltage, we travel, we can’t — they’re starting to do more of that on the inside, but it was predominantly local. So we have to build these locals much, much stronger. And you’ll see us do that. You’ll see us add there. But in general, I would tell you the inside piece of it and the mechanical piece, we’re early. So that’s where the gap is for us and try to enhance that as quick as possible.”
“I mean, as long as we don’t have to go behind that, what I would consider NERC fence and the nuke fence, we’re good. I think once you get behind there, we have to de-risk ourselves and think hard about it. It’s not something that the company’s jumping up and down to take a risk on. We’re always around the edges on things and I think as long as we can do the things that we know how to do and stay out of the nuclear fence, we feel comfortable. We’re not the reactor person and we’re not the person inside the fence. There’s a lot of ancillary things we can do and will do, but once we cross the line of that fence, it’s not us.”
“I’ll stand by my comments previously that the company on these type of projects are not — we’re not going to take certain kinds of risk on them. And so I feel comfortable with where we sit there. I feel comfortable with the conduct. And I can look everyone, all the investors in the eyes and say, everything I’ve said about risk on a combined cycle, we have not taken that. So I’m happy with where we sit, happy with the contract structure that it’s a collaborative structure with the client that allows both to come out in a way that we can derisk both of ourselves and give the right answer to the ratepayer as well as a large load customer.”
“We bought a great family business, long-standing, everything that we thought, and we would do it 10 times over. I feel like as far as how it’s integrated with our offering now, I mean the inbounds and what we can do certainly picked up on the mechanical side. We’re addressing and investing them. We can do a lot from fabrication. They already had large facilities and broad-based service offering. So we’ll expand it very quickly, much like we’ve done with Cupertino and Blattner.”
“We want a modern, robust grid. I mean, in order to have an economy that we see today, the grid has to be modern. And not only are we seeing these new projects, but just you still have an ongoing — I mean, we performed very nicely for 3 decades in negative load growth. And that [grid maintenance and repair] business is still there. I mean we still have to operate these systems. And so you have that ongoing with the load in front of it, and it’s broad-based.”
Disclosure: John Rotonti is an investor in and the portfolio manager of the Bastion Industrial and Infrastructure Portfolio, which owns shares of Quanta.
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