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Primoris' (PRIM) Q4 Earnings and Sales Beat, View Upbeat

Primoris Services CorporationPRIM reported adjusted earnings of 25 cents per share in fourth-quarter 2017, down around 10.7% year over year. Earnings, however, beat the Zacks Consensus Estimate by a penny.

Including one-time net tax benefit from the remeasurement of deferred tax assets and liabilities using enacted tax rates, the company posted earnings of 44 cents per share in the fourth quarter compared to 28 cents reported in the prior-year quarter.

Primoris posted revenues of $579 million, down around 3.8% from the prior-year quarter due to a decrease in sales in the Pipeline & Underground segment. However, revenues surpassed the Zacks Consensus Estimate of $557 million.

Primoris Services Corporation Price, Consensus and EPS Surprise

Primoris Services Corporation Price, Consensus and EPS Surprise | Primoris Services Corporation Quote

Cost of sales slipped 4.3% to $511 million from $533 million in the year-ago quarter. Gross profit edged down 0.2% year over year to $68.5 million. Gross margin expanded 40 basis points (bps) year over year to 11.8%.

Selling, general and administrative expenses flared up 10.3% year over year to $43.8 million. Operating profit declined to $24.7 million from $28.9 million recorded in the prior-year quarter. Consequently, operating margin shrunk 50 bps year over year to 4.3%.

Segment Performance

Power, Industrial, and Engineering: Net sales jumped 46% to $162.9 million from $111.6 million in the year-ago quarter. Gross profit remained flat year over year at $13.2 million in the reported quarter.

Pipeline and Underground: Sales plunged significantly to $63 million from $185 million reported in the year-ago quarter. The segment recorded a gross profit of $12.5 million compared with $24.2 million in the year-earlier quarter.

Utilities and Distribution: Net sales grew 21.5% year over year to $230 million. Gross profit was up 15.6% to $36.3 million from the prior-year quarter.

Civil: Sales increased 5.8% year over year to $122.9 million. The segment recorded a gross profit of $6.5 million compared with a loss of $0.3 million reported in the comparable quarter last year.

2017 Performance

Primoris reported earnings per share of $1.40 in 2017, up a whopping 174.5% year over year. Earnings also beat the Zacks Consensus Estimate of $1.10.

Revenues in 2017 climbed 20% year over year to $2.4 billion from $2.0 billion reported in the prior year. The figure also came in line with the Zacks Consensus Estimate.

Financial Update

Primoris reported cash and cash equivalents of $170.4 million as of Dec 31, 2017, up from $135.8 million as of Dec 31, 2016. Cash flow from operations came in at $188.9 million in 2017 compared to $62.6 million recorded last year. At the fourth-quarter end, long-term debt, excluding the current portion, was approximately $193.4 million, down from $203.2 million at the end of 2016.

Primoris reported total backlog of $2.6 billion as of Dec 31, 2017, down from $2.8 billion as of Dec 31, 2016.

On Feb 21, the board of directors announced 6 cents per share dividend to stockholders of record on Mar 30, 2018, payable on Apr 13.

Outlook

For fiscal 2018, net income will lie between $1.50 and $1.70 per diluted share. This outlook is based on an expected second-quarter 2018 commencement date for a major pipeline project in backlog, anticipated levels of customer maintenance, MSA (Master Service Agreement) spending, new project awards, and a projected corporate tax rate of 28%.

Primoris believes MSAs will provide a baseline revenue stream and expects the large-diameter pipeline market to continue its strength through 2018 to the next several years. The company also anticipates growth opportunities in the year, rising from renewable power, small-diameter pipeline, industrial, and mid-scale EPC (Engineering, Procurement, and Construction) projects. However, prevalent uncertainty in the energy markets remains a headwind for the company.

Share Price Performance

Over the past year, Primoris underperformed the industry to which it belongs to. The company's shares have lost around 4.1% compared with roughly 6.6% growth recorded by the industry during the same time frame.

Zacks Rank & Key Picks

Primoris currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same sector include EMCOR Group, Inc. EME , Granite Construction Incorporated GVA and MasTec, Inc. MTZ . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here .

EMCOR has a long-term earnings growth rate of 15%. Its shares have gained 21.4%, over the past six months.

Granite Construction has a long-term earnings growth rate of 7%. The company's shares have rallied 16.9% during the same time frame.

MasTec has a long-term earnings growth rate of 14%. The stock has gained 32.7% in six months' time.

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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 Nasdaq, Inc.


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

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