Estimates have been surging for
Primoris Services Corporation
) after the company delivered solid fourth quarter results. It is a
Zacks #1 Rank (Strong Buy) stock.
The valuation picture looks reasonable with shares sporting a PEG
ratio of just 0.7. It also pays a dividend that yields 0.7%.
Primoris Services is a small cap specialty contractor and
infrastructure company with over 99% of revenues coming from the
It primarily operates in two segments: East Construction Services
and West Construction Services. These segments specialize in a
range of services that include designing, building/installing,
replacing, repairing/rehabilitating and providing management
services for construction related projects throughout the U.S.
The company has grown rapidly over the last couple years through
both strong organic growth and acquisitions. And its domestic focus
insulates it relatively well from the recession in Europe and
slowdown in China.
Fourth Quarter Results
Primoris delivered an excellent "beat & raise" quarter on March
1. Earnings per share came in at 24 cents, beating the Zacks
Consensus Estimate by 2 cents.
Revenue rose 12% to $373.1 million, well ahead of the Zacks
Consensus Estimate of $306.0 million. This was driven by strong
growth in both the East and Western Construction Services
The gross profit margin expanded 60 basis points to 13.7% of
revenues. And operating income increased 11% over the same period.
Primoris recorded a $1.16 billion backlog at the end of 2011, a 30%
increase year-over-year. This prompted analysts to revise their
estimates significantly higher for both 2012 and 2013, sending the
stock to a Zacks #1 Rank (Strong Buy) stock.
The Zacks Consensus Estimate for 2012 is now $1.22, representing 7%
EPS growth. The 2013 consensus estimate is currently $1.40,
corresponding with 15% growth.
As you can see in the Price & Consensus chart above, although
consensus estimates have been soaring, the stock hasn't yet
responded. This could present a great buying opportunity.
Shares trade at just 12.9x 2012 earnings, well below the industry
median of 17.2x. And based on a consensus 5-year EPS growth rate of
18.1%, its PEG ratio is an attractive 0.7.
On top of this, the company pays a dividend that yields a solid
0.7%. With a solid balance sheet and strong cash flow, expect
dividend increases as long as earnings continue to grow.
The Bottom Line
With earnings estimates surging and valuation at very reasonable
levels, Primoris offers investors attractive upside potential.
Todd Bunton is the Growth & Income Stock Strategist for
and Co-Editor of the
Reitmeister Value Investor
PRIMORIS SERVCS (
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