Primoris (PRIM) Unit Secures Parking Contract Worth $30 M

Primoris Services Corporation PRIM announced that ARB Structures, part of its West Construction Services segment, has secured a new parking structure award valued at $30 million. Shares of Primoris Services gained 2% since the announcement on May 26.

The project is scheduled to begin in the second quarter of 2015 and is slated to be completed in the third quarter of 2016. The award is for a new 588,566 square foot above ground parking structure in The Spectrum Center area of Irvine, CA. The parking structure will provide over 1,635 new parking spaces.

The scope of work includes site clearing and demolition, boxing and relocation of numerous specimen trees, grading, and site improvements including architectural paving and extensive landscaping. The project also includes the replacement of an existing cooling tower that services an existing building adjacent to the site.

This award comes on the heels of another contract, valued at $11 million, secured by ARB Structures for a new parking structure in San Diego, CA, which will provide over 1,069 new parking spaces.

Primoris Services reported disappointing first-quarter results with earnings plunging 86% year over year to 3 cents per share due to unusually wet weather, especially in Texas and the Gulf Coast region. Earnings were also impacted by continued uncertainty in the energy market.

Sales in the West Construction Services segment decreased 20% to $186.3 million in the quarter. The primary reason for the decline in revenues was ARB Industrial division’s completion of a large solar power project in the 2014, offset slightly by revenue growth at Rockford from a large pipeline project in the Houston, TX area. Gross profit plunged 32% to $21.4 million from $31.7 million in the year-ago quarter. The decrease in gross profit was primarily the result of work shutdowns due to poor weather as well as the completion of a higher margin pipeline and natural gas power projects in the prior-year quarter.

Total backlog was a record of $2.14 billion as of Mar 31, 2015 against $2 billion as of Dec 31, 2014. During the next four quarters, Primoris is expected to realize revenues of around 53% from the East Construction Services segment backlog, about 73% from the West Construction Services segment backlog and 98% from the Energy segment.

Primoris 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 Primoris’ to widen its existing offerings while expanding into new geographies in the Midwest.

Further, Primoris will benefit from increase in backlog, the diversity of the new project awards, and the level of bidding activity. The drivers for industrial, utility, power and pipeline markets remain positive, which will also aid Primoris’ growth. Moreover, strong balance sheet position and acquisition prospects will strengthen the company’s performance.

However, increasingly stringent regulatory and environmental requirements for infrastructure improvements and significant reduction in oil prices since the second half of 2014 have created uncertainties for the company, and will remain headwinds in the near 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.

Primoris currently has a Zacks Rank #5 (Strong Sell). Stocks to consider in the sector are Dycom Industries Inc. DY and Watsco Inc. WSO, both carrying a Zacks Rank #2 (Buy).

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