MASTEC INC (MTZ) stock intrinsic value fair value estimate & owner earnings analysis

MasTec builds and maintains US infrastructure: communications networks (wireless, fiber, install-to-the-home), electric transmission and distribution lines, renewable and other power projects, data-center and civil work, and natural gas pipelines. It serves roughly 1,800 customers under master service agreements and project contracts. Revenue was $14.3 billion in 2025 (up from $12.3 billion), and the 18-month backlog stood at $18.96 billion at December 31, 2025, up from $16.78 billion a year earlier and $14.30 billion the year before. However, 47% of that backlog sits under service agreements that customers can cancel on short or no notice, so backlog is an indicator, not a guarantee. How we measured earnings. We start with operating cash flow, remove the working-capital swings that whipsaw a contractor's cash (a $410 million drain in 2025, a $441 million inflow in 2024), subtract stock compensation as a real cost, and subtract the capital spending needed to keep the fleet running. Two judgements matter. First, MasTec finances a large share of its equipment through finance leases ($229.5 million added in 2025 alongside $260.0 million of cash capex), so we count those additions as capital spending, and we net the $56 million to $84 million a year it received from selling used equipment in 2023-2025. Second, only the part of capex needed to sustain the business is deducted; capex that supports revenue growth is excluded. Owner earnings after interest were $2.13 per share in 2022, $2.49 in 2023, $5.38 in 2024 and $7.03 in 2025. Because we value the whole business first and then subtract the debt, we add interest paid back to get the business's cash flow per share: $3.53 (2022), $5.56 (2023), $7.85 (2024) and $9.27 (2025). The reported figures reconcile to net income plus depreciation and non-cash items to within about 2% for 2023-2025. The starting level. We use the median of 2021-2025, $7.80 per share (about $615 million a year), because that window captures MasTec at its current scale (revenue roughly doubled from 2019) and spans a strong year, a weak 2022-2023 stretch when earnings collapsed (net income of $33 million in 2022 and a loss in 2023), and the recovery. We deliberately do not use 2025's $9.27. That year was helped by about $115 million of deferred cash taxes; across 2021-2025 the deferral nets to about $1 million, so the median is not flattered by tax timing. Cash flow per share grew 18% in 2025; the base case assumes only 6% in its first year, which is below that pace. The first half of 2026 was much stronger (revenue up 28%, net income including minority owners $215 million versus $102 million), but two quarters of improvement are not yet enough for us to move the starting level, so we treat it as an upside not credited. Debt. At June 30, 2026, MasTec owed $2.74 billion, including $388 million of finance leases, against $316 million of cash, or net debt of about $2.42 billion ($30.77 per share). About $1.8 billion of notes and term loan fall due in 2028-2029 ($600 million of 4.5% notes in August 2028, a $600 million term loan in June 2028, $550 million of 5.9% notes in June 2029 and $72 million of 6.625% notes in August 2029). Its fixed-rate notes carry coupons of 4.5% to 6.625%, close to our 6% benchmark, so we make no cost adjustment in the base or bull case. Debt rose about $410 million in the first half of 2026, a period in which MasTec spent $267 million on acquisitions; we do not credit any earnings from those acquisitions. Outside owners of partly owned subsidiaries earned about 5.5% of 2025 profit, so we deduct 5.5% of what remains after debt in every case. Base case: $104.86 per share. Cash flow per share rises to $8.27 in year one and $8.52 in year two, then holds flat. The two years of growth are backed by the backlog increase and by 2026 revenue running well ahead of 2025; we credit no growth beyond that, and none from future acquisitions, new markets or margin gains, because those depend on things that have not yet happened. After that we assume the earning power simply persists at that level, supported by recurring service agreements (47% of backlog) and a fleet whose replacement cost we already charge. The business is worth $141.73 per share; it owes $30.77, leaving $110.96; less the minority owners' $6.10, the shares are worth $104.86. Bear case: $50.97 per share. The 2022-2023 experience repeats: cash flow per share sits at $4.50 for three years (between 2022's $3.53 and 2023's $5.56), then recovers only to the ten-year median of $5.35 and stays there. The 2025 tax legislation accelerated the phase-out of clean-energy tax credits, and Clean Energy and Infrastructure is a third of revenue ($4.7 billion). With the 2028-2029 maturities we assume refinancing at about 7.5% instead of 6%, which costs about $175 million ($2.23 per share). The business is worth $86.92 per share; it owes $30.77 plus $2.23 for expensive refinancing, leaving $53.93; less minority owners' $2.97, the shares are worth $50.97. Even here, cash flow ($355 million) covers the roughly $176 million annual interest bill. Bull case: $144.09 per share. Cash flow per share returns immediately to 2025's demonstrated $9.27 (which includes the tax-deferral benefit noted above) and grows 5% a year for four more years, in line with backlog growth of 13% and 17% in the last two years, reaching $11.27, then holds. The business is worth $183.24 per share; it owes $30.77, leaving $152.47; less minority owners' $8.39, the shares are worth $144.09. What changed since the previous analysis. The earlier estimate ($43 bear, $105 base, $169 bull) started from net income plus depreciation less cash capex and used varying discount rates. This version uses cash-based earnings that include leased equipment and remove working-capital swings, one 6% discount rate, and it subtracts debt explicitly. The result is a higher bear case, an unchanged base case and a lower bull case. What would make this wrong. A repeat of 2022-2023-style project losses with a longer duration, cancellation of service-agreement work that makes up nearly half the backlog, weaker demand for renewable-power construction, or refinancing at higher rates than assumed would push value toward the bear case. Sustained margins at the first-half 2026 pace, if they carry through the full year, would show the base case is too low. Given the swings in results, the leverage and the reliance on project execution, a large margin of safety is warranted, so the margin-of-safety price sits close to the bear case rather than near the base case.