Primoris Posts Record Q4 Earnings, Shares Up

Shares of Primoris Services Corporation (PRIM) gained 0.4% and closed at $31.27 after the company reported fourth-quarter 2013 earnings on Feb 28. Earnings increased 33% year over year to a record 44 cents per share from 33 cents. The results beat the Zacks Consensus Estimate of 39 cents.

Operational Update

Revenues in the quarter increased 12% year over year to $538 million. The results were ahead of the Zacks Consensus Estimate of $522 million. The year-over-year rise was driven by increased underground work in the West Construction Services segment, including the quarterly results of Q3C.

Cost of sales rose 8.7% to $463 million from $426 million in the year-ago quarter. Gross profit improved 36.7% year over year to $75 million. Consequently, gross margin expanded 250 basis points (bps) year over year to 13.9% primarily attributable to closure of a major power plant project in the West Construction Services segment, acquisition of Q3C and improved margins for industrial work in the East Construction Services Segment.

Selling, general and administrative expenses climbed 27.6% year over year to $34 million. Operating profit was $40.8 million, up 45.3% from the prior-year quarter. Operating margin expanded 180 bps year over year and was 7.6%.

Segment Performance

East Construction Services: Net sales remained flat at $203 million compared with the year-ago quarter. Increased revenues at James and Cardinal Contractors were offset by a decline at Sprint. Gross profit however, fell 6.9% to $15 million from $16.4 million in the year-ago quarter.

West Construction Services: Sales went up 21.7% year over year to $323 million. The year-over-year growth was driven by increased pipeline work at Rockford and a full quarter of contribution from Q3 Contracting. The segment’s gross profit soared 64.3% year over year to $57.5 million, benefiting from the completion of a large California power plant by the ARB Industrial division.

Engineering: Net sales declined 3.5% year over year to $45 million. Gross profit also decreased to $9.2 million from $9.6 million in the year-ago quarter.

Financial Update

Primoris ended 2013 with cash and cash equivalents of $196 million, up from $157.7 million as of 2012-end. As of Dec 31, 2013, long-term debt increased to $191 million from $128 million as of Dec 31, 2012. Debt-to-capitalization ratio was 32% as of Dec 31, 2013, compared with 27.8% as of Dec 31, 2012.

Total backlog was record $1.94 billion as of Dec 31, 2013 against $1.35 billion as of Dec 31, 2012.

Primoris’ board has authorized a share repurchase program to buy shares worth $23 million depending on market conditions. The repurchase program will expire on Dec 31, 2014.

Fiscal 2013 Performance

For full-year 2013, Primoris reported earnings per share of $1.35, up 23% from $1.10 in 2012. The results surpassed the Zacks Consensus Estimate of $1.28.

Revenues for the year 2013 increased 26% year over year to $1944 million, beating the Zacks Consensus Estimate of $1818 million.

Outlook

For full-year 2014, Primoris expects strong contributions from recent acquisitions as well as the legacy group. A strong balance sheet and acquisitions are also expected to drive growth.

During 2014, Primoris will realize revenues of around 53% of the East Construction Services segment backlog, about 98% of the West Construction Services segment backlog and 93% of the Engineering segment backlog. The Engineering segment will expand based on margin increase in both domestic and international markets.

Dallas, Texas-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 #3 (Hold). However, some better-ranked stocks in the sector include James Hardie Industries plc (JHX), USG Corporation (USG) and Wolseley plc (WOSYY). All of these have a Zacks Rank #2 (Buy).

Read the Full Research Report on JHX
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