Tutor Perini Shares Gain on Earnings Beat


Shares of Tutor Perini Corporation (TPC) have gained 10% since the company reported a 3% year-over-year increase in its fourth-quarter adjusted earnings to 68 cents per share and a 23% improvement in 2013 earnings to $1.80 on Feb 24. The results were ahead of the respective Zacks Consensus Estimate of 61 cents for the fourth quarter and $1.72 for 2013.

Including one-time items, earnings in the quarter were the same at 68 cents. Including a tax benefit associated with goodwill and intangible asset impairment charge and a charge related to an adverse jury verdict received in Dec 2012, earnings in the year-ago quarter were 86 cents. Compared with this, earnings in the quarter plunged 21%. Including one-time items, earnings in 2013 was $1.80 compared with the year-ago loss of $5.59 per share.

Operational Updates

Total revenue went down 1% year over year to $1,099 million, missing the Zacks Consensus Estimate of $1,159 million. Revenues declined on a year-over-year basis as last year’s quarter had benefited from activity on Hurricane Sandy-related projects in New York.

Barring Civil, revenues declined across all segments. Management Services suffered the worst with a 10% decline to $51 million, followed by Building with a 7% dip to $337 million and Specialty Contractors witnessed a 5% decline to $309 million. The 18% increase in revenues to $428 million in the Civil segment was not enough to compensate for the decline in the other 3 segments.

Revenues in 2013 increased 2% year over year to $4.175 billion, short of the Zacks Consensus Estimate of $4.235 billion. Increased activity on certain hospitality and gaming projects as well as the start-up of projects at Hudson Yards in New York led to the year-over-year improvement.

Cost of sales decreased 3% to $959 million from $988 million in the year-ago quarter. Gross profit rose 11% year over year to $140 million. Gross margin improved 140 basis points (bps) to 12.7%.

General and administrative expenses increased 6% year over year to $69 million. Operating profit was $70 million, up 16% from $70 million in the year-ago quarter. Operating margin was 6.4%, a 90 basis point improvement from 5.5% in the year-ago quarter.

Financial Updates

As of Dec 31, 2013, cash and cash equivalents were $120 million versus $168 million as of Dec 31, 2012. Cash flow from operating activities was $51 million for 2013 compared with a usage of $68 million in the prior year.

Long-term debt, excluding current portion, amounted to $619 million as of Dec 31, 2013, compared with $669 million as of Dec 31, 2012. The debt-to-capitalization ratio improved to 37% as of Dec 31, 2013 from 39% as of Dec 31, 2012.

Backlog and Pending Orders

Total backlog as of Dec 31, 2013, was $7 billion, up 25% year over year. In the quarter, additions to backlog worth mentioning were - $510 million platform project at Hudson Yards in New York City, the company’s approximately $200 million share of the St. Croix Crossing bridge project connecting Oak Park Heights, MN and St. Joseph, WI, a $61 million mixed-use building development project in New Orleans, LA, and a $41 million landfill closure and sewer improvements project in Guam.

Tutor Perini expects earnings per share to lie between $2.20 to $2.40 in 2014 and revenues in the range of $4.5–$5 billion.

The company continues to win contracts and has the prospects of winning future awards given significant volume of pending awards. Building segments and margins are also expected to grow over the next year, driven primarily by the additional phases of the Hudson Yards projects.

Sylmar, Calif.-based Tutor Perini Corporation is a leading civil and building construction company offering diversified general contracting and design-build services to private clients and public agencies globally.

Tutor Perini currently retains a Zacks Rank #4 (Sell). A better-ranked stock in the sector building and heavy construction industry with a favorable Zacks Rank is Orion Marine Group, Inc. (ORN) with a Zacks Rank #2 (Buy).

Peer Performance

One of Tutor Perini’s peers, Chicago Bridge & Iron Company N.V. (CBI), posted fourth-quarter adjusted earnings of $230.0 million or $1.91 per share (excluding one-time items), well exceeding the Zacks Consensus Estimate of $1.17 per share.

Great Lakes Dredge & Dock Corp. (GLDD) reported fourth-quarter 2013 earnings per share of 8 cents, down 11% from 9 cents per share in the year-ago quarter, beating the Zacks Consensus Estimate of loss of 6 cents a share.

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