Shares of Tutor Perini Corporation TPC plunged more than 10% to close at $23.27, a day after the company reported nearly 18% year-over-year decline in its fourth-quarter earnings on Feb 26. Decreased activity on certain higher-margin projects and tunnel projects on the West Coast pulled down earnings to 56 cents in the reported quarter compared with 68 cents in the year-ago quarter. Earnings also trailed the Zacks Consensus Estimate of 71 cents.
Operational Updates
Tutor Perini’s total revenue went up 9% year over year to $1.2 billion, driven by increased activity on mass transit projects in California and New York, as well as an industrial building project in California. Revenues, however, missed the Zacks Consensus Estimate of $1.3 billion.
Tutor Perini witnessed revenue increase in all of its segments in the reported quarter. Building segment recorded highest year-over-year growth of around 21% to $436.4 million. Specialty Contractors reported 1% year-over-year rise in revenues to $331 million, while Civil also posted an improvement of 1% to $459.8 million from $455 million in the year-ago quarter.
Cost of sales went up 11% year over year to $1.1 billion. Gross profit declined 7% year over year to $129.7 million. Gross margin contracted 190 basis points (bps) to 10.8%.
General and administrative expenses decreased 6% year over year to $65 million. Operating profit stood at $64.4 million, decreasing 8.9% from $70.2 million in the year-ago quarter. Operating margin fell 100 bps year over year to 5.4% in the quarter.
Financial Updates
Tutor Perini had cash and cash equivalents of $135.6 million at the end of 2014 versus $120 million at 2013-end. The company generated cash of $56.7 million in 2014 compared to cash flow of $50.7 million in 2013. Long-term debt, excluding the current portion, was $784 million as of Dec 31, 2014, compared with $619 million as of Dec 31, 2013.
Backlog and Pending Orders
Total backlog at end of 2014, was $7.8 billion, up 13% year over year. Significant increase in backlog was primarily driven by two large new mass transit projects in New York. The company has backlog of 45% from Civil, 28% from Building and 27% from Specialty Contractors in the year.
2014 Performance
Tutor Perini’s earnings of $2.20 per share for 2014 increased 22% from $1.80 a share in 2013 driven by increased revenues and net favorable adjustments to anticipated recoveries associated with two legal rulings issued in the second quarter of 2014. Earnings, however, lagged the Zacks Consensus Estimate of $2.34 and merely touched the lower end of management’s guided range of $2.20 to $2.40.
Revenues for the full year increased 8% year over year to $4.5 billion from $4.2 billion in 2013 primarily due to increased activity on projects at Hudson Yards in New York, electrical and mechanical projects on the East Coast, mass transit projects in California and New York, and bridge projects in the Midwest and New York. Revenues missed the Zacks Consensus Estimate of $4.6 billion and came in line with the lower end of the company’s guidance range of $4.5–$4.7 billion.
Outlook
Tutor Perini guided earnings per share in the range of $2.20 to $2.50 for 2015. The company expects revenues in the range of $5.0–$5.5 billion for the full year.
Tutor Perini is expected to benefit from continued strength and improvement across end markets and large pipeline of project opportunities across all segments. The company continues to win contracts and shows prospects of winning future awards, given its significant volume of pending awards.
Sylmar, CA-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 carries a Zacks Rank #4 (Sell). However, some better-ranked stocks in the sector include Dycom Industries Inc. DY, Acuity Brands, Inc. AYI and Graña y Montero SAA GRAM. All these stocks sport a Zacks Rank #1 (Strong Buy).
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