Goldman Sachs lowers MYR Group, raises MasTec

Goldman Sachs upgraded MasTec (MTZ) to Buy, citing significant new pipeline construction opportunities and a potential revenue run rate of $2.5 billion through 2030 for its pipeline segment, leading to increased EBITDA estimates and a price target of $195. Conversely, MYR Group (MYRG) was downgraded to Neutral as its current valuation already reflects expected utility spending growth, with Goldman Sachs awaiting further estimate revision drivers while maintaining its $168 price target.

Analysis

Goldman Sachs has recalibrated its outlook on two U.S. energy services firms, upgrading MasTec (MTZ) to Buy while downgrading MYR Group (MYRG) to Neutral, reflecting differing near-term growth catalysts despite broad tailwinds from utility spending. For MasTec, the upgrade is underpinned by substantial new pipeline construction opportunities, with seven recent final investment decisions (FIDs) expected to drive a "strong backlog increase." Goldman Sachs now projects MasTec's pipeline segment run-rate revenue at approximately $2.5 billion through 2030, a significant uplift from the previous $2.0 billion estimate. This is particularly impactful as Pipeline Infrastructure represents MasTec’s highest EBITDA margin segment, leading Goldman Sachs to revise its EBITDA estimates for 2025, 2026, and 2027 to be 2%, 8%, and 3% above FactSet consensus, respectively. Furthermore, new framework agreements in MasTec's Clean Energy segment are anticipated to enhance operational visibility and margins, contributing to an increased price target of $195. Conversely, MYR Group's downgrade to Neutral stems from the assessment that its current stock price adequately reflects a high single-digit revenue growth compound annual growth rate (CAGR) through 2030, aligning with broader utility spending forecasts. While Goldman Sachs acknowledges MYRG as a pure-play vehicle for small to mid-cap (SMID) exposure to transmission and distribution, the firm expresses a preference to await more distinct drivers for further estimate revisions before adopting a more constructive stance, maintaining its price target at $168. The InvestingPro analysis cited in the article also suggests MYRG may not be significantly undervalued. This differentiated view highlights specific project-driven upside for MasTec not yet fully priced in, contrasting with MYR Group where growth appears largely factored into its current valuation.

Key Decisions for Investors

• Investors may consider initiating or increasing exposure to MasTec (MTZ) given its upgraded rating, strong pipeline backlog growth driven by new FIDs, upwardly revised EBITDA estimates, and a raised price target, suggesting potential for outperformance.
• For MYR Group (MYRG), a neutral or hold stance is advisable as its current valuation appears to reflect anticipated growth from utility spending, and further catalysts for estimate revisions are awaited; investors might monitor for incremental positive developments before increasing positions.
• Portfolio managers should closely track developments in pipeline construction approvals and utility capital expenditure trends, as these are key sector drivers influencing the divergent outlooks for MTZ and MYRG.