BAIRD 2026 GLOBAL INDUSTRIAL CONFERENCE - MASTEC INC

Explicit Guidance:

• FY2027 EBITDA: Targeting approximately $1.6 billion, representing significant growth from the $1.1 billion achieved in 2025.
• FY2027 Revenue: Expects overall revenue growth driven by backlog, though the Communications segment is modeled as flat year-over-year for 2027 due to the gap between RDOF and BEAD program executions.
• FY2027 Margin Outlook: Despite flat top-line revenue in the Communications segment, expects double-digit margins driven by profitability initiatives.
• FY2028 Targets: Highly confident in achieving organic targets of $2.2 billion in revenue and $15 in EPS (excluding the Superor acquisition impact); anticipates beating these targets in Power Delivery, Pipeline, and Clean Energy/Infrastructure segments.
• Long-term Pipeline Revenue: Projects 2028, 2029, and 2030 to be the "best years in history" for the pipeline business, with activity levels exceeding any previously seen cycle.

Business-Segment Outlook:

• Communications (Wireless): Viewed as stable and marginally growing driven by capacity constraints and network upgrades (4G to 5G/6G); no significant cyclical downturns anticipated in the next few years.
• Communications (Wireline):
  • Middle Market Fiber: Growing significantly to support wireless carriers (e.g., T-Mobile) offsetting their costs.
  • Hyperscaler Fiber: Anticipating a "significant expansion" of fiber build-outs to data centers; currently early in the cycle.
  • Rural Fiber (BEAD): Expecting a "flat" period in 2027 as customers reassess priorities between RDOF completion and BEAD funding starts; expects market share gains from cable operator vendor consolidation in the longer term.
• Power Delivery & Clean Energy: Anticipating strong growth and potential to exceed FY2028 guidance; driven by grid modernization and renewable construction.
• Pipeline: Revenue growth in 2026 is strong; expects better project dispersion and visibility in 2027 compared to the "condensed periods" of project starts in late 2026 which caused short-term delays.
• Data Centers: Revenue contribution expected to grow substantially in 2027 from ~10% in 2026; growth driven by acquisition of Superior, labor availability, and expansion into new geographies.

Market and Competitive Outlook:

• Data Center Construction: Identifies labor (specifically electrical and mechanical) as the primary bottleneck rather than permitting or financing.
• Pipeline Industry: Anticipates increased demand for natural gas as a baseload power source alongside renewables; expects fewer players in the space than the previous cycle, reducing competition.
• Cable Operator Consolidation: Anticipates long-term benefits from cable operators (Comcast, Charter) consolidating vendors and reducing in-house construction, which will likely increase outsourcing to companies like Mostech.
• Fourth Wireless Carrier: Acknowledges potential opportunity if entities like SpaceX deploy 80,000+ sites, but notes this is not included in current guidance.
• Gas Generation: Rapid order flow expected for simple cycle and reciprocating engine (RICE) projects; targeting a $1 billion business in these specific technologies, with growth occurring faster than anticipated.

Macro / Industry Outlook:

• Legislation: Highly optimistic about a potential bipartisan permitting bill in the upcoming Congress to accelerate pipeline and infrastructure projects.
• Energy Mix: Anticipates a "both/and" approach for power generation, requiring renewables (for speed) and natural gas (for baseload) to meet national demand.
• Political Environment: Expects favorable conditions for data center growth in states like Ohio, Indiana, and Florida (noting Florida's shift from anti-data center to pro-data center under new governance).
• Labor Markets: Recognizes the industry-wide challenge of securing high-skilled labor for complex construction projects.

Strategic Initiatives:

• Fiber Build: Executing a 2,100-mile full-turnkey fiber project (engineering, permitting, execution) expected to begin in the second half of 2027, partially included in Q3 backlog, with a 5,000-mile total pipeline expected.
• Acquisitions: Superior acquisition is complete, integrating data center capabilities; previously suspended a late-stage acquisition (Maastricht) to clear SEC information barriers for share buybacks, though negotiations could restart.
• Capital Allocation: Activated a $250 million share buyback program, prioritized over M&A due to perceived stock undervaluation post-election; intends to utilize free cash flow for both buybacks and strategic deals.
• Geographic Expansion: Leveraging Superior's footprint to expand data center presence from a 5-state region to broader markets.

Risks and Headwinds to Outlook:

• Communications Segment: Short-term revenue headwinds in 2027 due to the timing gap between RDOF and BEAD program funding and customer restructuring/consolidation.
• Project Timing: Potential for 60-90 day permit delays in the pipeline business if multiple projects start simultaneously (as seen in late 2026), though expected to be a manageable two-quarter issue.
• Execution Risk: Management cites internal execution and client selection as the primary risk factors over macro exogenous events; emphasizes the risk of not securing work due to limited resources to meet total market demand.
• Policy Uncertainty: While optimistic about bipartisan permitting, acknowledges that the final sequencing of projects post-election remains to be fully realized.

Management Tone on the Future:

• Confidence: Highly confident in achieving FY2028 organic targets and "very bullish" on the energy sector (gas + renewables) and pipeline outlook.
• Resilience: Emphasizes a deliberate, diversified portfolio strategy that allows the company to remain intact despite headwinds in specific segments (e.g., Communications).
• Selectivity: Expresses a strategic preference to be "picky and choosy" with projects, prioritizing high-quality accounts with low permitting risk over volume, given the abundance of market demand.

Miscellaneous:

• Acquisition Impact: The Superior acquisition is expected to make data center work roughly 10-15% of the pro forma revenue mix, growing significantly in 2027.
• Workforce Model: Retains a hybrid labor model (union/non-union) allowing flexibility across different regions and project types (e.g., union-heavy data centers vs. non-union legacy work).
• Cash Flow: Fourth quarter is traditionally strong, generating approx. $600 million in cash, which facilitated the decision to prioritize buybacks.