Imperial Downgrades Orion Marine Group Amid Potential Texas Slowdown

Imperial Capital has downgraded Orion Marine Group, Inc.

to In-Line from Outperform, saying that "lingering project challenges and a potential Texas slowdown may limit upside." "Although we expect ORN to benefit from growth in both its Civil Marine (CM) and Commercial Concrete (CC) businesses, we await more visibility regarding improved execution following recent project challenges," analyst Scott Levine wrote in a note. Houston, Texas-based Orion said it expects to achieve its FY16 targets (revenue: $625 million – $675 million, EPS: $0.30-0.40), citing a healthy award tally (gross book-to-bill: 1.21x, 1.09x in CM, 1.32x in CC), and an expectation that its Tampa "loss" projects will be complete by mid-year. Levine cut his FY16 EPS estimate to $0.30 from $0.32, which assumes 67 percent of EBITDA will be realized in the second half of 2016, as the Tampa projects conclude. Orion also guided FY17 EBITDA of $70 million, which Levine said indicates the company's "normalized earnings power, assuming modest topline growth and underlying double-digit margins." The analyst cut his FY17 EBITDA estimate by $1 million, to $59 million, as Levine thinks Texas macro headwinds could hurt growth over the next several quarters. Orion reported first quarter EPS of -$0.04, above Levine's -$0.07 estimate, though below consensus of -$0.01. Revenue of $129.6 million was $14 million below the analyst's estimate. According to TipRanks, Levine has a success rate of 48 percent with an average return per recommendation of -6.3 percent. The analyst is ranked 3,523 out of 3,913 analysts. Shares of Orion closed Wednesday's regular trading at $5.36. Levine trimmed his price target to $6 from $7.