Primoris Services Corporation (PRIM) reported first-quarter 2013 earnings of 19 cents per share, declining 5% from 20 cents per share delivered in the year-ago quarter. The results, however, outperformed the Zacks Consensus Estimate by a penny.
Operational Update
Revenues in the reported quarter augmented 40.6% year over year to $410 million. The results were way ahead of the Zacks Consensus Estimate of $351 million. The year- over-year rise was attributable to an 18.6% increase in organic growth and the remaining 22% increase was from the acquisitions of Sprint, Saxon, Q3C, and FSSI.
Cost of sales went up 43% to $363.9 million in the first quarter from $253.9 million in the year-ago quarter. Gross profit improved 22.6% year over year to $46.1 million. Gross margin, however, contracted 170 basis points (bps) to 11.2% in the quarter.
Selling, general and administrative expenses increased 41% year over year to $28.6 million. Operating profit was $17.5 million in the quarter, flat compared to the prior-year quarter. Operating margin reduced 160 bps to 4.3% in the quarter.
Segment Performance
East Construction Services: Net sales at the segment spiked 56% to $190 million in the quarter, primarily due to the acquisition of Sprint and increased gas and crude-oil pipeline activity, partly offset by a decline in the JCG Heavy Civil and Infrastructure & Maintenance divisions. Gross profit for the segment increased 31.3% to $15 million from $11 million in the year-ago quarter.
West Construction Services: West Construction Services reported sales of $207.7 million, up 31% from the year-ago quarter, led by increased revenues at Rockford, partly offset by a revenue decline in the ARB Industrial division. The segment’s gross profit grew 17.8% year over year to $28.7 million.
Engineering: Net sales in the reported quarter went up 3.4% year over year to $12.1 million. Consequently, gross profit rose 32% to $2.3 million in the quarter compared to $1.7 million in the year-ago quarter.
Dividend
Primoris’ Board has approved a 16.7% increase in its regular quarterly dividend. The company will now pay 3.5 cents per share to its shareholders, up from the prior quarter’s dividend of 3 cents per share. The increased dividend will be paid on Jul 15, 2013, to shareholders of record as of Jun 28, 2013.
Financial Update
Cash and cash equivalents were $141.5 million as of Mar 31, 2013 compared with $157.5 million as of Dec 31, 2012. Long-term debt amounted to $157.7 million as of Mar 31, 2013, compared with $147.8 million as of Dec 31, 2012. The debt-to-capitalization ratio expanded to 31.4% as of Mar 31, 2013 from 30.7% as of Dec 31, 2012. Total backlog was $1.22 billion as of Mar 31, 2013 compared to $1.35 billion as of Dec 31, 2012.
Outlook
Primoris remains optimistic about its all business lines for the near term as well as the long term. For the full year 2013, the company expects strong contributions from the recent acquisitions, as well as legacy group, driven by favorable weather conditions.
Strength is witnessed in the upstream market and the midstream market (with long haul projects returning) while the downstream market holds promise, with contractor capacity constraints already evident.
The increased investment in construction fleet will be helpful in profitability growth. Water and wastewater markets have also recovered in 2013, which will drive revenue growth.
Over the next four quarters, Primoris will recognize as revenues around 49% of the East Construction Services segment backlog, about 96% of the West Construction Services segment backlog and roughly 98% of the Engineering segment backlog.
Dallas, TX-based Primoris is a specialty contractor and infrastructure company which serves diverse end markets. The company also provides a wide range of construction, fabrication, maintenance, replacement, water and wastewater, and engineering services to major public utilities, petrochemical companies, energy companies, municipalities, and other customers.
Primoris currently retains a short-term Zacks Rank #1 (Strong Buy). Other companies in the building and heavy construction industry with favorable Zacks Ranks are China Communications Construction Company Limited (CCCGY), Chicago Bridge & Iron Company N.V. (CBI) and Orion Marine Group, Inc (ORN). While China Communications Construction holds a Zacks Rank #1 (Strong Buy), Chicago Bridge & Iron and Orion Marine carry a Zacks Rank #2 (Buy).
CHICAGO BRIDGE (CBI): Free Stock Analysis Report
CHINA COMM CONS (CCCGY): Get Free Report
ORION MARINE GP (ORN): Free Stock Analysis Report
PRIMORIS SERVCS (PRIM): Free Stock Analysis Report
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