Wedbush Securities Reiterates Its Neutral Rating On Primoris Services Following Earnings

Wedbush Securities is reaffirming its cautious stance on shares of Primoris Services PRIM despite the company's better-than-expected Q4 results. While the headline results handily beat expectations, top-line growth was driven primarily by contributions from the Ruby Pipeline Project associated with the Rockford Corporation acquisition announced in November 2010. Excluding the $79.2 million contribution from Ruby in Q4, total revenue would have been below expectations.

With an evolving revenue mix that has impacted the company's margin profile, challenging end market conditions given the state and local budget issues, and uncertainty about the health of the backlog, Wedbush is maintaining its Neutral rating. It advises investors to look for a more attractive entry point into PRIM shares.

Our $10 price target is derived by applying a 5x EV/EBITDA and 13x P/E multiples to our FY12 estimates, which is consistent with the peer group multiples. The applied multiples reflect: the improved business prospects coming from energy-related work; and continued challenges with the visibility into the business pipeline.

PRIM closed Wednesday at $8.71