Infrastructure construction company Primoris (NYSE:PRIM) fell short of the market’s revenue expectations in Q3 2026, with sales falling 10.4% year on year to $1.95 billion. Its non-GAAP profit of $1.20 per share was 53.4% above analysts’ consensus estimates.

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StockStory’s take

Primoris saw a notable downturn in its latest quarter, with revenue falling short of Wall Street expectations and a year-on-year decline. Management pointed to execution challenges in its renewables segment, including significant cost overruns and regulatory delays that led to project deferrals and reduced revenue. CEO Koti Vadlamudi described these issues as "meaningful headwinds," but noted that five of six problematic projects are now complete, with the final one near completion. The company’s other segments, particularly Utilities and Power Delivery, showed resilience, helping to offset some of the renewables shortfall.

Looking ahead, Primoris has lowered its full-year adjusted earnings guidance, reflecting ongoing softness in renewables and the deferral of about $450 million in revenue to 2027. Management signaled that while the renewables environment remains volatile, the backlog and opportunity pipeline in gas power generation, pipeline, and industrial markets are expanding. CFO Ken Dodgen emphasized that the company expects Energy segment margins to return to targeted levels in 2027, stating, "We still expect gross margins in the Energy segment to be in the 6%-8% range for the full year 2026, and return to our normal 10%-12% range in 2027."

Key insights from management’s remarks

Management attributed the quarter’s performance to the lingering impact of underperforming renewables projects, while highlighting operational improvements and growth in Utilities, Power Delivery, and industrial markets.

• Resolution of challenged renewables projects: The company completed five of six legacy renewable energy projects that had significant cost overruns and expects the last one to wrap up soon, reducing future drag on earnings.
• Deferred renewables revenue: Regulatory volatility and scheduling issues led to roughly $450 million in renewables revenue being shifted into 2027, with management stating that "the long-term fundamentals supporting utility-scale solar development remain firmly in place."
• Utilities and Power Delivery growth: The Utilities segment saw revenue and backlog growth, especially in gas operations and power delivery, offsetting continued weakness in communications due to fiber market softness and BEAD-related funding delays.
• Margin improvement in industrial and pipeline: The Energy segment, aside from renewables, benefited from margin gains in natural gas generation and pipeline work, with a record sales funnel and new project wins, including a $250 million pipeline project.
• PayneCrest acquisition outperformance: PayneCrest exceeded internal expectations, with backlog more than doubling since acquisition and strong exposure to data center and industrial markets, positioning it as a future growth driver.

Drivers of future performance

Primoris’ outlook is shaped by recovery in renewables, continued growth in gas power generation, and evolving project mix across its portfolio.

• Renewables project recovery: Management expects renewables revenue to grow modestly from the revised $1.7 billion base as deferred projects begin in 2027, with normalized margins anticipated as legacy issues fade.
• Expansion in gas power generation: The company projects gas power generation revenue to surpass $1 billion next year, supported by robust backlog and customer demand, while maintaining a disciplined approach to project selection and risk.
• Segment mix and margin restoration: The shift toward higher-margin pipeline and industrial work, together with a rebound in renewables execution, is expected to restore Energy segment margins to the historical 10%-12% range in 2027, though improvements are likely to be weighted toward the back half of the year.

Catalysts in upcoming quarters

In the coming quarters, our analysts will be monitoring (1) the resolution and margin performance of the final legacy renewables project, (2) the pace of new bookings in both renewables and gas power generation, and (3) the ability of the Utilities segment to maintain margin gains amid mixed market conditions. The scale and timing of deferred project starts, as well as execution on PayneCrest’s pipeline, will also be key indicators for the recovery trajectory.

Primoris currently trades at $68.53, down from $79.62 just before the earnings. Is there an opportunity in the stock? See for yourself in our full research report (it’s free).

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