Primoris Beats Q3 Earnings, Shares Up - Analyst Blog

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Shares of Primoris Services Corporation ( PRIM ) gained 9% since it reported third-quarter 2013 earnings on Nov 5. Earnings increased 23.5% year over year to 42 cents per share from 34 cents benefiting from the company's expansion in energy-focused markets. The results beat the Zacks Consensus Estimate by a penny.

Operational Update

Revenues in the quarter increased 28% year over year to $551 million. The results were ahead of the Zacks Consensus Estimate of $507 million. The year-over-year rise was attributable to 10% growth at legacy companies and the remaining 17.7% increase from the acquisitions of Sprint, Saxon, Q3C, and FSSI.

Cost of sales rose 26% to $475.8 million from $375.5 million in the year-ago quarter. Gross profit improved 34% year over year to $75 million. Consequently, gross margin expanded 70 basis points (bps) year over year to 13.7%.

Selling, general and administrative expenses climbed 40% year over year to $36.5 million. Operating profit was $38.9 million, up 28.7% from the prior-year quarter. However, operating margin remained flat year over year at 7%.

Segment Performance

East Construction Services: Net sales decreased 1.4% year over year to $178.7 million. The acquisitions of Saxon and FSSI contributed $14.4 million to revenues. Revenue growth was also driven by improved activity at JCG Industrial, Infrastructure & Maintenance divisions and increased water facility treatment work in Florida and Texas, partly offset by a decline in the JCG Heavy Civil division and Sprint Pipeline. Gross profit however dropped 43% to $10.6 million from $18.6 million in the year-ago quarter.

West Construction Services: Sales went up 49.7% year over year to $362 million. The Q3C acquisition contributed $62 million to revenues. In addition, increased revenues at Rockford and ARB Structures facilitated the growth, partially offset by a revenue decline in the ARB Underground and ARB Industrial divisions. The segment's gross profit soared 75.6% year over year to $62.5 million.

Engineering: Net sales rose 19.9% year over year to $10 million. Gross profit also increased 15.8% year over year to $2.3 million.

Financial Update

As of Sep 30, 2013, cash and cash equivalents amounted to $174 million versus $157.5 million as of Dec 31, 2012. Long-term debt was $188.7 million as of Sep 30, 2013, compared with $128.3 million as of Dec 31, 2012. The debt-to-capitalization ratio expanded 530 bps to 36% as of Sep 30, 2013, from 30.7% as of Dec 31, 2012.

Total backlog was $1.92 billion as of Sep 30, 2013 compared with $1.35 billion as of Dec 31, 2012.

Outlook

Primoris anticipates gains from continuous investment in equipment fleet, because of its bullishness in current end-markets. Strong balance sheet and potential acquisitions are also expected to drive growth. In addition, the company predicts that U.S. energy infrastructure is poised for significant expansion in coming years.

The company remains optimistic about the petrochemical and refining industry and expects to gain several more projects in the near future. The Engineering segment will also develop based on its growth trend in margin expansion in both domestic and international markets.

For full-year 2013, the company expects strong contributions from recent acquisitions, as well as the legacy group. Water and wastewater markets have also recovered this year, which is likely to augment revenue growth.

Over the next four quarters, Primoris will recognize as revenues around 63% of the East Construction Services segment backlog, about 99% of the West Construction Services segment backlog and 91% of the Engineering segment backlog.

Primoris plans to continue booking new job awards in the Heavy Civil division, specifically in Texas and Mississippi, which have more than compensated for continued weakness in the Louisiana market.

Dallas, Texas-based Primoris is a specialty contractor and infrastructure company which serves diverse end markets. The company also provides a wide range of construction, fabrication, maintenance, replacement, water and wastewater, and engineering services to major public utilities, petrochemical companies, energy companies, municipalities and other customers.

Primoris currently has a Zacks Rank #3 (Hold). Jiangsu Expressway Co. Ltd. ( JEXYY ) also belongs to the same industry and holds a Zacks Rank #2 (Buy).

Engineering company Chicago Bridge & Iron Company N.V. ( CBI ) reported third-quarter 2013 adjusted earnings of $121.3 million or $1.12 per share (excluding  one-time items), in line with the Zacks Consensus Estimate. Adjusted net income improved 46.7% year over year on the back of strong project activities during the quarter.

Earnings of Granite Construction Incorporated ( GVA ) fell 70% year over year to $11 million or 28 cents per share in third-quarter 2013, from $37.1 million or 94 cents, due to the negative impact from a large highway project in Washington State. The results lagged the Zacks Consensus Estimate of 78 cents.



CHICAGO BRIDGE (CBI): Free Stock Analysis Report

GRANITE CONSTRU (GVA): Free Stock Analysis Report

JIANSU EXPWY CO (JEXYY): Get Free Report

PRIMORIS SERVCS (PRIM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CBI , GVA , JEXYY , PRIM

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