Tutor Perini Corporation’s TPC shares have more than doubled since it reported impressive earnings and revenues in first-quarter 2020 on May 6. The Zacks Building Products - Heavy Construction industry rallied just 35.3% in the same time frame. The stock's momentum is likely to continue, courtesy of positive investors’ sentiments that can primarily be attributed to solid first-quarter 2020 performance and strong backlog.
Impressive First-Quarter 2020 Performance
In first-quarter 2020, its earnings of 34 cents surpassed the Zacks Consensus Estimate by a notable 1033.3%. A loss of 1 cent per share was reported in the prior year. Notably, this marked the highest first-quarter earnings in the past 10 years, backed by strong revenue growth across the segments, and improved performance on various projects in New York in the Specialty Contractors segment.
Revenues of $1.25 billion also topped the consensus mark by 18.4% and grew 30.5% year over year. This was the strongest first-quarter growth in the past eight years. The uptick was mainly driven by solid segmental growth, with the Civil and Specialty Contractors segments surging 46% and 47%, respectively, year over year.
Quarterly backlog also remained strong at $10.6 billion, of which 54% was contributed by Civil, 24% by Building and 22% by Specialty Contractors. Last year’s backlog of $11.6 billion was driven by the timing of $3.2 billion of new awards and contract adjustments. Nonetheless, the company booked three most significant military projects — including a $133-million contract in North Carolina and Florida, and a $64 million mining work in Alabama — in first-quarter 2020. Meanwhile, it intends to bid on several large civil projects this year and anticipates that backlog will continue to support strong revenue growth going forward.
Strong 2020 Guidance Despite COVID-19 Woes
As the overall U.S. construction market is ready to resume work across the nation after being significantly hurt by coronavirus-led shutdowns, the industry parameters are trending upward. Notably, infrastructure construction firms like Great Lakes Dredge & Dock Corporation GLDD, MasTec, Inc. MTZ and Orion Group Holdings, Inc. ORN have been experiencing stable demand.
Tutor Perini, which currently sports a Zacks Rank #1 (Strong Buy), is well positioned to tap significant opportunities in the future. The company expects activity levels to significantly increase in second-half 2020, given large backlog and improved operating performance in the Specialty Contractors group. Notably, it has been pursuing various new high-margin project opportunities and expects to make significant progress in current and next year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company does not foresee any adverse impact from the pandemic on financial results as most of the businesses has been largely unaffected by the same. Meanwhile, it reaffirms its earnings guidance of $1.80-$2.10 per share for 2020. Also, it anticipates strong revenue growth in 2020, with improved margin performance across the segments.
A Few Headwinds May Hinder Future Performance
Although its solid results and backlog are testimony to the fact that it will perform well in the remainder of 2020, some temporary project issues persist, particularly in New York City and at the Newark Terminal in New Jersey. The company has not been much impacted by the COVID-19 pandemic, yet it may experience project delays and timing issues.
Notably, bidding in the first and second quarter has been pushed back from 60 to 90 days due to the COVID-19 crisis.
Its Building segment has been experiencing low fees associated with CM work in a building industry that has stiff competition and many large contractors. In the last reported quarter, operating margin was flat with the year-ago period due to immaterial adjustments on a couple of projects that are now complete. Building segment operating margin for 2020 is expected to be just 2-3%.
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