Shares of Tutor Perini Corporation (TPC) gained nearly 4% to close at $28.78 after yesterday’s trading session on the back of 81% year-over-year improvement in its second-quarter 2014 earnings to 58 cents per share, announced on Aug 5. The earnings increase was driven by revenue growth and strong profitability in the Civil segment. Earnings also surpassed the Zacks Consensus Estimate of 50 cents.
Operational Updates
Total revenue went up 3% year over year to $1.08 billion, driven by increased activity on civil and building projects at Hudson Yards in New York and on certain electrical and mechanical projects on the East Coast. Revenues however missed the Zacks Consensus Estimate of $1.15 billion.
Barring Building segment which witnessed a 12% year-over-year decline in revenues to $390 million, revenues grew across the other two segments. Specialty Contractors recorded the highest increase in revenue of around 13.4% year over year to $390 million, followed by Civil which posted 11.6% improvement to $398 million from $356.7 million in the year-ago quarter.
Cost of sales went up 0.8% to $955 million from $947 million in the year-ago quarter. Gross profit rose 22% year over year to $129.5 million. Gross margin improved 180 basis points (bps) to 11.9%.
General and administrative expenses decreased 3.6% year over year to $64 million. Operating profit was $65 million, increasing 66% from $39.5 million in the year-ago quarter. Operating margin was 6%, expanded 220 bps from 3.8% in the year-ago quarter.
Financial Updates
Tutor Perini ended the quarter with cash and cash equivalents of $140 million versus $120 million as of 2013-end. Cash used in operating activities was $20.3 million in the second quarter compared with cash from operating activities of $45.9 million in the year-ago quarter. Cash usage in the second quarter was due to the timing of payments primarily in Specialty Contractors and Building segments.
Long-term debt, excluding the current portion, amounted to $761 million as of Jun 30, 2014, compared with $619 million as of Dec 31, 2013. The debt-to-capitalization ratio was at 39% as of Jun 30, 2014 compared with 37% as of Dec 31, 2013.
Backlog and Pending Orders
Total backlog as of Mar 31, 2014, was $7.8 billion, up 18% year over year. In the quarter, additions to backlog worth mentioning were a $255 million multi-unit residential tower project in Florida, a $120 million retail development project in California, an hospitality and gaming development project in Mississippi for $113 million and a $67 million excavation and tunnel project in British Columbia.
On Jul 2, 2014, the company was awarded a contract valued at approximately $267 million by the Port Authority of New York and New Jersey for the John F. Kennedy (JFK) International Airport Runway 4L-22R Runway Safety Area Compliance/Runway Reconstruction project. Value of the contract will be included in the third-quarter backlog.
Outlook
Tutor Perini maintained its earnings per share guidance range of $2.20 to $2.40 in 2014. The company trimmed its revenues guidance in the range of $4.5–$4.7 billion from $4.5–$5 billion.
Tutor Perini is expected to benefit from its strong backlog and new contracts. The company continues to win contracts and has the prospects of winning future awards, given its significant volume of pending awards.
Sylmar, CA-based Tutor Perini Corp. 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 holds a Zacks Rank #4 (Sell). Other stocks worth considering in the sector include Quanex Building Products Corp. (NX), Boise Cascade Co. (BCC) and PGT, Inc. (PGTI). All these stocks carry a Zacks Rank #2 (Buy).
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