Key Takeaways:
Primoris Q2 revenue fell 10.7% to just under $1.7 billion as renewable cost overruns cut gross margin to 4.9% from 12.3% a year earlier.
"The second quarter reflected the majority of the impact from a limited number of renewable energy projects experiencing margin pressure," CEO Koti Vadlamudi said.
The revenue decline was driven by a 19.2% drop in energy-segment revenue, partially offset by higher natural gas generation and pipeline activity plus contributions from the PayneCrest acquisition. Utility segment revenue rose 2.8% to $19.6 million on gas operations and power delivery. Gross profit fell to $82.4 million, with the energy segment posting slightly negative gross margin versus 10.8% a year earlier.
Primoris maintained its full-year 2026 EPS guidance of $1.30 to $1.85 and adjusted EBITDA of $275 million to $325 million, but cut free cash flow expectations to $150 million to $200 million from $350 million to $400 million. CFO Ken Dodgen attributed the reduction primarily to renewable project impacts. The company identified six renewable projects with cost overruns; three are expected to reach substantial completion in the third quarter and the final project by year-end.
Backlog reached a record of just under $13.9 billion, up roughly $2.2 billion from the first quarter, after Primoris secured more than $3.9 billion in new awards. Energy bookings were led by approximately $1.4 billion in natural gas power-generation awards for simple-cycle projects in Texas, Missouri and Nevada. The natural gas generation opportunity funnel has grown to more than $8 billion, with revenue expected at $500 million to $600 million in 2026 and $800 million to $1 billion in 2027.
PayneCrest, acquired in May, exceeded expectations in its first two months, contributing approximately $200 million of backlog at quarter-end and $250 million in bookings. Management said the electrical construction business holds attractive relationships with industrial customers and hyperscale data-center clients.
The results intensify an ongoing securities class action filed by Hagens Berman Sobol Shapiro LLP, which alleges Primoris misled investors about project management capabilities on fixed-price renewable energy contracts. The lawsuit covers investors who purchased shares between Aug. 5, 2025 and June 22, 2026, with a lead plaintiff deadline of Sept. 21, 2026. Shares of Primoris have lost more than $6 billion in market value since May 5 after two separate selloffs triggered by renewable project disclosures.
Management expects energy-segment gross margins of 6% to 8% for full-year 2026, improving to 8% to 10% in the fourth quarter and returning to the historical 10% to 12% range in 2027. Liquidity stood at $959 million at quarter-end with net debt to EBITDA at 1.6 times.
The guidance hold shows management expects the renewable drag to ease in the second half. Investors will watch the third-quarter earnings call for progress on the remaining three troubled projects and updated margin trajectory.
This article is for informational purposes only and does not constitute investment advice.
