Primoris (PRIM)

Infrastructure construction company Primoris (NYSE:PRIM) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 16.7% year on year to $1.65 billion. Its non-GAAP profit of $0.98 per share was 49.4% above analysts’ consensus estimates.

Company Overview

Listed on the NASDAQ in 2008, Primoris (NYSE:PRIM) builds, maintains, and upgrades infrastructure in the utility, energy, and civil construction industries.

Construction and maintenance services companies not only boast technical know-how in specialized areas but also may hold special licenses and permits. Those who work in more regulated areas can enjoy more predictable revenue streams - for example, fire escapes need to be inspected every five years. More recently, services to address energy efficiency and labor availability are also creating incremental demand. But like the broader industrials sector, construction and maintenance services companies are at the whim of economic cycles as external factors like interest rates can greatly impact the new construction that drives incremental demand for these companies’ offerings.

Competitors of Primoris include Flour (NYSE:FLR), AECOM (NYSE:ACM), and private company Kiewit.

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Primoris’s sales grew at an incredible 15.7% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Primoris’s annualized revenue growth of 16.2% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Primoris’s backlog reached $11.4 billion in the latest quarter and averaged 20.9% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for Primoris’s products and services but raises concerns about capacity constraints.

This quarter, Primoris reported year-on-year revenue growth of 16.7%, and its $1.65 billion of revenue exceeded Wall Street’s estimates by 10.6%.

Looking ahead, sell-side analysts expect revenue to grow 2.6% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

Primoris has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 10.9% gross margin over the last five years. That means Primoris paid its suppliers a lot of money ($89.11 for every $100 in revenue) to run its business.

This quarter, Primoris’s gross profit margin was 10.4%, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Primoris was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.8% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Primoris’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q1, Primoris generated an operating profit margin of 4.3%, up 1.1 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Primoris’s EPS grew at an astounding 23.2% compounded annual growth rate over the last five years, higher than its 15.7% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t expand and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Primoris’s two-year annual EPS growth of 26.7% was fantastic and topped its 16.2% two-year revenue growth.

In Q1, Primoris reported EPS at $0.98, up from $0.47 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Primoris’s full-year EPS of $4.37 to grow 2.6%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Primoris has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.9%, lousy for an industrials business.

Taking a step back, we can see that Primoris failed to improve its margin during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level.

Primoris’s free cash flow clocked in at $25.58 million in Q1, equivalent to a 1.6% margin. Its cash flow turned positive after being negative in the same quarter last year, but we note it was lower than its five-year cash profitability. Nevertheless, we wouldn’t put too much weight on a single quarter because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Primoris’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 10.5%, slightly better than typical industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Uneventfully, Primoris’s ROIC has stayed the same over the last few years. Rising returns would be ideal, but this is still a noteworthy feat since they're already high.

Primoris reported $351.6 million of cash and $932.4 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $460.8 million of EBITDA over the last 12 months, we view Primoris’s 1.3× net-debt-to-EBITDA ratio as safe. We also see its $57.81 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Primoris blew past analysts’ backlog expectations this quarter. We were also excited its EPS outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 3.7% to $69.50 immediately after reporting.

Updated: June 14, 2025 at 11:02 PM EDT

When considering an investment in Primoris, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Primoris possesses a number of positive attributes. First off, its revenue growth was exceptional over the last five years. And while its low gross margins indicate some combination of competitive pressures and high production costs, its backlog growth has been marvelous. On top of that, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Primoris’s P/E ratio based on the next 12 months is 16.6x. When scanning the industrials space, Primoris trades at a fair valuation. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $88.30 on the company (compared to the current share price of $74.25), implying they see 18.9% upside in buying Primoris in the short term.