Key Takeaways:
- Renewables Reset: A handful of troubled solar and battery storage projects dragged Q2 gross margin down to 4.9% from 12.3% a year ago.
- Price Projection: Based on current execution, PRIM stock could reach $102.78 by December 2028.
- Potential Gains: This target implies a total return of 40.6% from the current price of $73.12.
- Annual Return: Investors could see roughly 15.6% annual growth over the next 2.3 years.
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Primoris Services (PRIM) just went through a rough quarter. Revenue fell 10.7% to $1.7 billion, and gross margin dropped sharply as six renewable energy projects ran into cost overruns.
CEO Koti Vadlamudi didn’t sugarcoat it, calling the results “not representative of the performance standards we have historically defined at Primoris.”
Two of the six troubled projects are now complete, three more should wrap up in Q3, and the last one is on track for year-end.
Here’s the twist: while renewables stumbled, the rest of the business had a record quarter. Primoris booked $3.9 billion in new awards, pushing total backlog to a record $13.9 billion.
Natural gas power generation alone brought in $1.4 billion of new bookings, and the company’s Utility segment grew nearly 3% even as its communications business slowed.
Management kept full-year guidance intact: adjusted EPS of $2.05 to $2.60 and adjusted EBITDA of $275 million to $325 million. They also said Q2 marks the year’s low point, with results expected to improve steadily through Q4.
Despite the strong backlog and growth outside renewables, PRIM trades at $73.12, down 39% over the past year. Our model sees meaningful upside from here.
What the Model Says for Primoris Services Stock
Primoris runs three main businesses: utility infrastructure (gas lines, power delivery, communications), energy (pipelines, natural gas power plants, renewables), and, through its recent PayneCrest acquisition, electrical construction services.
The renewables slump is temporary, not structural. Management still sees more than $16 billion of solar and battery storage opportunities in its core markets, and expects $1.5 billion to $2 billion in new renewable bookings in the second half of this year, mostly landing in Q4.
Meanwhile, natural gas power generation is becoming a bigger growth driver. The addressable funnel there has grown to over $8 billion, and management expects that business to bring in $800 million to $1 billion in revenue next year, up from roughly $500 million to $600 million this year.
PayneCrest, acquired earlier this year, is already outperforming expectations and picked up $250 million in new bookings during its first two months as part of Primoris, largely tied to hyperscaler data center customers.
Using a forecast of 5.5% annual revenue growth and 4.4% net income margins, our model projects the stock could climb to $102.78 within 2.3 years. This assumes an 18.6x price-to-earnings multiple, close to where the stock trades today.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for PRIM stock:
1. Revenue Growth: 5.5%
Primoris grew revenue 19% over the past year and has averaged 16.8% growth over the last five years.
Near-term growth looks slower as renewables gets reset, but record backlog and strong bookings in gas power and utilities should support steady growth ahead.
2. Operating margins: 4.4%
Margins took a hit this quarter because of the renewables cost overruns, but management expects Energy segment margins to return to a normal 10% to 12% range by 2027 once the troubled projects are done.
Net income margin has averaged 3.1% over the past five years.
3. Exit P/E Multiple: 18.6x
PRIM currently trades at 18.6x forward earnings, below its one-year average of 26x but above its 10-year average of 15x.
Our model holds the multiple roughly flat rather than assuming it expands back toward recent highs.
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What Happens If Things Go Better or Worse?
Here’s how the stock might perform under different scenarios through December 2028:
- Low Case: If revenue growth slows to a 6.2% CAGR and net income margins settle at 3.5%, investors could still see a 59.8% total return (11.4% annually).
- Mid Case: With 6.9% growth and 3.7% margins, we expect a total return of 100.1% (17.3% annually).
- High Case: If renewables bookings accelerate and gas power demand keeps climbing, driving 7.6% revenue growth and 3.9% margins, returns could reach 142.3% total (22.6% annually).
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Primoris stock price depends on how quickly it works through the renewables backlog and how fast new segments like gas power and electrical services scale.
In the low case, issues like cost overrun drag the profit down to a certain extent and revenue growth slows down relatively.
In the high case, the cost overruns are not repeated and backlog filling continues at the current pace so Primoris shows a good growth in revenue and good profitability as well.
How Much Upside Does Primoris Services Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
