MasTec Options Heavily Traded

MasTec (MTZ) options were heavily traded Tuesday ahead of the construction company’s earnings after-hours Wednesday. Some 2,007 option contracts changed hands, which is 12x the average daily volume of 116 contracts. The majority of the open interest in MasTec is centered in the 10 and 12.50 October ‘08 calls. There are also 1,408 contracts open on the 17.50 January ‘09 calls. The stock is up sharply in 2008, but remains well below its 2007 highs as the U.S. economy continues to struggle.

MasTec managed to surprise to the upside during its two most recent quarters, with analysts estimating just $0.21 per share for the second quarter. Meanwhile, DA Davidson recently raised its price target on the company from $9.50 to $12.50 per share, but noted it was the result of a higher valuation multiple rather than an increase in earnings per share, reflecting the increased growth potential of the pipeline market and the firm’s expansion into electrical and gas transmission.

MasTec’s acquisition of PumpCo, for $44 million plus a five-year earnout, will help it enter into the growing petroleum pipeline industry. The acquisition is expected to add to earnings next year, but has already helped it increase its growth potential and therefore earnings multiple. The diversification away from simply telecommunications also helps the firm make sure that it is not as vulnerable to one industry.

MasTec is a specialty contractor engaged in building, installation, maintenance and upgrade of communications and utility infrastructure with primary operations in the United States. The company provides similar services to customers to build and maintain infrastructure and networks that are critical to the transportation and delivery of voice, video and data communications, electricity and other energy resources.

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