We first bought PRIM in 2019 because their business backlog increases significantly each quarter, and their focus is on the energy and utility sectors, both of which are poised for long-term growth.
The stock price waffled but never fully appreciated to the level of results. I toyed with selling it many times over the years, but operations kept getting better. Because of that, I knew the stock would eventually follow.
It finally has, and we are now sitting on a >300% gain
Results:
Primoris Services announced a robust financial performance in its Q3 2024 Earnings Call on November 5, 2024. Under the leadership of CEO Tom McCormick and CFO Ken Dodgen, the company reported record revenue exceeding $1.6 billion, a 7.8% increase from the previous year.
This growth was largely attributed to the Energy and Utilities segments, with the Energy segment experiencing a surge due to solar activities and the Utilities segment growing from communications projects.
Key Takeaways
- Primoris Services Corporation saw a 7.8% year-over-year increase in revenue, reaching over $1.6 billion in Q3 2024.
- The Energy segment’s revenue grew by 13.9%, mainly from solar activities, while the Utilities segment increased by 2.4% due to communications projects.
- Record backlog reported at approximately $2.5 billion, driven by solar and industrial sectors.
- Cash flow from operations for the quarter was $222 million, with year-to-date figures surpassing full-year 2023.
- Gross profit improved to $198.6 million, and gross margins increased to 12% from 11.4%.
- Full-year EPS guidance raised to $2.85 to $3 per share, with adjusted EPS at $3.40 to $3.55.
Company Outlook
- Optimism for Q4 2024 and the year 2025, with a focus on safety, efficiency, and customer service.
- Strong liquidity with nearly $625 million available for growth initiatives.
- Anticipated growth in the renewables market, with plans to maintain a book-to-bill ratio above 1x.
- Capital allocation priorities include organic growth, debt reduction, and potential increases in shareholder dividends.
Bearish Highlights
- Seasonal slowdowns are expected, which may affect Q4 performance.
- Gross margins in the Energy segment decreased slightly to 11% from 12.3%.
- SG&A expenses rose due to increased personnel costs
Bullish Highlights
- The renewables business surpassed $1 billion in revenue, with a backlog of $2.9 billion, including significant projects in battery storage and operations and maintenance services.
- The Utilities segment is projected to see margin improvement and mid-single-digit revenue growth, particularly in power delivery and communications.
Misses
- Despite overall strong performance, gains on sales were slightly lower than the previous quarter, although they still exceeded expectations.
Q&A Highlights
- The company paid down $50 million in debt and plans to pay down an additional $50 million by Q4.
- M&A activity continues with a focus on targeted acquisitions.
- Ongoing improvements and growth potential in solar are expected to contribute significantly to future revenue, with over $450 million generated in the quarter.
Primoris Services Corporation remains focused on disciplined growth and profitability as it navigates the challenges and opportunities of the renewable energy sector. With a solid balance sheet and a strategic approach to capital allocation, the company is poised to maintain momentum into the final quarter of 2024 and beyond.
