Primoris' Unit Wins Underground Contracts Worth $218M - Analyst Blog
Primoris Services Corporation PRIM has secured two new underground awards valued at $218 million, one for a for a natural gas pipeline located in central Florida and the other for a natural gas pipeline in Susquehanna County, PA. These will be included in the company's first-quarter backlog calculation.
The contracts were secured by Rockford Corporation, part of Primoris’ West Construction Services segment. Scope of work of the central Florida contract, larger of the two, consists of 77 miles of 36 inch diameter pipeline and 49 miles of 30 inch diameter pipelines for a total 126 miles of natural gas pipeline. Some of the project characteristics include marsh work that will require a large amount of concrete-coated pipe or pipe set on concrete weights, as well as sheet piling and dewatering. There are a total of 9 directional drills under canals, lakes, and Interstates. The project is slated to begin in the second quarter of 2016 and will be ready for service by the third quarter of 2017.
The second project’s work consists of 1.87 miles of 24 inch diameter pipeline and 2.54 miles of 12 inch diameter pipeline for a total of 4.4 miles of natural gas pipeline. Construction has already begun in the first quarter of 2015 and the pipeline is scheduled to be ready for service by the third quarter of 2015.
Earlier in March this year, ARB Inc., a unit of the West Construction Services segment of Primoris, declared a new three-year Master Service Agreement ("MSA") worth $45 million from a major utility customer. This was followed by Cardinal Contractors, part of its East Construction Services segment, securing a new water contract with a municipal customer valued at $16 million.
The steady flow of contracts is welcome news for Primoris considering that the company delivered dismal fourth-quarter 2014 performance with decline in both top and bottom lines. Decrease in revenues was mainly led by a drop in sales in the West Construction Services segment. 2014 revenues also decreased year over year, primarily at the ARB Underground division due to reduction in revenues from traditional MSA customers and decline of one-time projects. However, Primoris remains optimistic about large capital replacement programs and integrity plans which will aid growth in the utility market, and in turn, assist growth in revenues.
During the next four quarters, Primoris is expected to realize revenues of around 40% from the East Construction Services segment backlog, about 100% from the West Construction Services segment backlog and 95% from the Engineering segment.
Primoris will also benefit from inorganic growth as the company recently acquired the assets of Aevenia, a subsidiary of Otter Tail Corp. OTTR, an energy and electrical construction company for $23 million. The buyout will help in widening Primoris’ existing offerings and expanding into new geographies in the Midwest.
Though increasingly stringent regulatory and environmental requirements for infrastructure improvements and significant reduction in oil prices in the last half of 2014 have created uncertainty, Primoris believes that its financial and operational capabilities will meet the short-term challenges.
Dallas, TX-based Primoris is a specialty contractor and infrastructure company that serves diverse end markets. The company also provides a wide range of construction, fabrication, maintenance, replacement, water and wastewater as well as engineering services to major public utilities, petrochemical companies, energy companies, municipalities and other customers.
Primoris currently has a Zacks Rank #5 (Strong Sell). Stocks to consider in the sector are Dycom Industries Inc. DY and Quanex Building Products Corp. NX, both sporting a Zacks Rank #1 (Strong Buy).
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