Primoris Wins Utility Contract for $262M

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ARB Inc., a unit of the West Construction Services segment of Primoris Services Corporation (PRIM) has secured a new underground contract from a major utility customer worth $200 million. The deal covers pipeline safety and replacement work in Southern California.

In 2010, California Public Utilities Commission (:CPUC) launched a pipeline safety rulemaking proceeding to provide new safety and reliability regulations for natural gas pipelines. In response, SoCalGas has submitted a Pipeline Safety Enhancement Plan (:PSEP), to CPUC which covers 3,640 miles of transmission pipelines.

ARB Inc. has been awarded two of the five regions of the utility’s PSEP Performance Partnership program. These two regions are the largest of the five, with an estimated combined spend of $200 million.

The work mainly includes class upgrades, either hydrotesting to a higher pressure or replacing existing lines with newer, stronger pipes. The construction work is scheduled to start in June 2014 and will be concluded by Dec 2016.

Primoris reported earnings of 21 cents per share, increased 11% year over year in the first-quarter of 2014. Revenues also grew 15% year over year to $470 million driven by increased revenues at ARB Industrial, Q3 Contracting and the James Construction Group Heavy Civil division.

West Construction Services segment also recorded a sales increment of 12.7% year over year to $234 million. The segment’s gross profit increased 10% year over year to $31.7 million. During the next four quarters, Primoris will realize revenues of around 98% of the West Construction Services segment backlog.

The company remains optimistic on strong balance sheet which will provide the flexibility for continuous investment in external and internal opportunities. In addition, various tailwinds such as the aging pipeline system, oil and natural gas pricing differentials and environmental regulations will drive demand in Primoris’ end-markets providing growth opportunities both in the near and mid-term.

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.

At present, Primoris has a Zacks Rank #3 (Hold). Some better-ranked stocks in the building and heavy construction industry include EMCOR Group Inc. (EME), Sterling Construction Co. Inc. (STRL) and Tutor Perini Corp. (TPC). All these stocks carry a Zacks Rank #2 (Buy).

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