Mastec (MTZ): Construction Co. with Great Fundamentals Attracts Bullish Options Action

MasTec (MTZ) traded 5,556 calls on the day, more than 30X daily average call volume as IV30 jumped 19.8%, yet shares were down 1.9% on the day. The action was in June, and mainly $22.50/$25 call spreads bought at $1.15 throughout the session, shares at $22.56 to $23. Earnings come after market on May 4th and shares have been in a strong trend higher, near all time highs, while a longer term measured move to $26 is still in play from the breakout at $15. Shares have been climbing since reporting results last quarter.

Shares of the heavy construction firm trade 14.94X earnings, 0.77X sales and 9.46X cash flow, which makes it cheap compared to larger peers like Fluor (FLR), Foster Wheeler (FWLT), McDermott (MDR) and Shaw Group (SHAW), and also with better growth forecasted and shown consistently. MasTec is involved with upgrading Utility and Communication infrastructures, which will obviously be in high demand moving forward. It also builds wind farms, solar farms, wireless communication systems, and delivers natural gas, oil and gasoline.

The most interesting business may be the emergency services for accidents and storm damages, considering the recent storms that have hit the South and Midwest, and done a lot of destruction.

The action came today as the Company announced the acquisition of Fabcor, a Canadian Energy Infrastructure Company, for $21.2M. On April 20th Wunderlich reiterated a Buy rating and raised its target to $26 from $21.

So, we have a momentum Company at cheap valuation and strengthening earnings seeing unusually bullish options activity, making MasTec look like a great Buy at these levels. The spreads are only looking for a bit over a 100% return as most of them were bought at $1.15 for a potential $2.50 return, and need at least a 5% move higher from here to start making money.



Disclosure: No Position at Time of Writing, but Considering as Long Term Investment