Primoris Services Corporation (PRIM - Snapshot Report) reported second-quarter 2013 earnings of 30 cents per share, up 30% from 23 cents in the year-ago quarter. The results were in line with the Zacks Consensus Estimate.
Revenues in the reported quarter increased 31.9% year over year to $445 million. The results were ahead of the Zacks Consensus Estimate of $437 million. The year- over-year rise was attributable to 15.4% growth at legacy companies and the remaining 16.5% increase was from the acquisitions of Sprint, Saxon, Q3C, and FSSI.
Cost of sales rose 31% to $385 million from $293 million in the year-ago quarter. Gross profit improved 35% year over year to $59 million. Consequently, gross margin expanded 30 basis points (bps) year over year to 13.3%.
Selling, general and administrative expenses increased 34.8% year over year to $31.5 million. The increase was due to costs related to the acquisitions of Silva, Saxon, Q3C, and FSSI as well as increased compensation. Operating profit was $27.9 million, up 35.7% from the prior-year quarter. Operating margin grew 30 bps to 6.3%.
East Construction Services: Net sales increased 12% year over year to $175 million. The acquisitions of Saxon and FSSI contributed $14.8 million to revenues. Revenue growth was also driven by enhanced activity at Sprint and increased water facility treatment work in Florida and Texas, partly offset by a decline in the JCG Heavy Civil and Infrastructure & Maintenance divisions. Gross profit, however declined 12% to $15 million from $17 million in the year-ago quarter.
West Construction Services: Sales rose 54% to $258 million from the year-ago quarter, led by increased revenues at Rockford, partly offset by a revenue decline in the ARB Industrial division. The Q3C acquisition also contributed $14.8 million to revenues. The segment’s gross profit grew a whopping 72.5% year over year to $41.9 million.
Engineering: Net sales went down 18.9% year over year to $11 million. Consequently, gross profit fell 1.9% year over year to $2.3 million.
Cash and cash equivalents were $113.7 million as of Jun 30, 2013 compared with $157.5 million as of Dec 31, 2012. Long-term debt amounted to $166.5 million as of Jun 30, 2013, compared with $147.8 million as of Dec 31, 2012. The debt-to-capitalization ratio expanded to 31.7% as of Jun 30, 2013 from 30.7% as of Dec 31, 2012. Total backlog was $1.38 billion as of Jun 30, 2013 compared to $1.35 billion as of Dec 31, 2012.
Primoris remains optimistic about its all business lines as it sees ample prospects for continued growth across end markets. Improvement in U.S. energy infrastructure will drive growth. In addition, the company believes that industrial and water end markets are poised for significant growth in the coming years.
For full-year 2013, the company expects strong contributions from the recent acquisitions, as well as legacy group. Water and wastewater markets have also recovered this year, which will drive revenue growth.
Over the next four quarters, Primoris will recognize as revenues around 50% of the East Construction Services segment backlog, about 98% of the West Construction Services segment backlog and 100% of the Engineering segment backlog.
Primoris will continue to book new Heavy Civil job awards, most significantly in Texas and Mississippi, which have more than offset continued weakness in the Louisiana market.
Dallas, Texas-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 Zacks Rank #3 (Hold).
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