Despite slightly lower revenue, Tutor Perini Corp. reported 5 percent higher income from construction operations in the first quarter of this year compared to last, driven by a shift toward higher-margin projects in the civil segment.Ronald Tutor, chief executive of the Sylmar-based company, said in a conference call with analysts to discuss first-quarter earnings that the ongoing COVID-19 pandemic had limited impact on the company’s quarter.
“We are off to a good start this year, having delivered solid first-quarter results that were ahead of expectations,” Tutor said on the call. “I’m hopeful that the pandemic’s worst effects are continuing to diminish, so that a robust economic recovery may continue over the coming months.”The building and specialty construction company noted that civil segment business contributed significantly revenue in the quarter, including projects related to the California high speed rail line, the San Francisco central subway lines, the Newark Airport Terminal One and the Andersen Air Force Base housing project in Guam. The civil segment’s operating profit margin for the first quarter increased 100 basis points year-over-year to 10.5 percent.During the thick of the pandemic’s impact, major government projects slowed and the disruption in retail caused a decrease in new projects, leading to losses for Tutor Perini that were offset by high-margin projects approved in the same timeframe. Now, citing economic recovery and a growing vaccination rate, Tutor said new projects that were previously backlogged are preparing to move forward again.“We are now seeing those projects come out on a very significant scale as money becomes made available. As such, the COVID impacts are diminishing, government funding is increasing and of course this doesn’t even take into consideration the infrastructure build that the Biden administration is pushing,” Tutor said. “We remain very optimistic that our backlog growth will resume by the second half of this year and should be significant by the second quarter next year.”Analyst reactionSteady earnings and future backlog rebuild prospects, coupled with the potential federal infrastructure-related catalysts, lead analysts to a positive outlook for the company’s performance going forward this year. A recent report from D.A. Davidson and Co. showed a price target of $22 per share and indicated the company had exceeded recovery expectations.“We continue to view Tutor Perini’s ability to sustain greater than $2 per share in earning per share in 2021 and 2022 based (in part) on a large book of business entering the year and recent bookings,” the report stated. “Broader prospects for infrastructure-related spending growth in the coming years, in addition to projects scheduled for bid later in 2021, should increase confidence in out-year earnings prospects. As current valuation doesn’t suggest the shares are ahead of this potential, we remain “Buy.”The company’s stock has been volatile during the last year. In February 2020, before the pandemic, shares peaked at $14.50 before rapidly declining to a low of $6 in March. Stocks remained sub-$10 until mid-May and began slowly climbing through the rest of 2020, closing the year at $12.95 per share.
Recovery has been more rapid in 2021 and shares closed June 16 at $14.43.
Tutor Perini booked $1 billion of new awards and contract adjustments in the first quarter of 2021, including a $269 million government building facility in Yountville, California with Rudolph and Sletten, and more than $220 million in various civil projects for London Construction in the Midwest.When asked about the second half of 2021 and revenue for 2022, Tutor expressed a positive outlook for the company’s revenue goals.“Let’s put it this way: I think (revenue will) go up. I think that the amount of work we’re going to get by the end of next year will go through the roof,” Tutor said. “I think our backlog will be new records that will far surpass our old records.”
Infrastructure Puts Tutor Perini on Growth Path
