Shares of Tutor Perini Corporation TPC hit a 52-week low of $14.80 on Jan 7, 2016, before closing a notch higher at $15.02. The company’s performance continues to face adverse impact from poor performance of its Specialty Contractors segment led by unfavorable adjustments associated with a number of projects. Strong competition and slowdown in economic conditions will also hurt growth.
This Sylmar, CA-based civil and building construction company has underperformed the Zacks Consensus Estimate in one of the trailing four quarters with an average negative surprise of 25.30%.
What Led to the Drop?
Tutor Perini’s earnings plunged nearly 33% year over year to 68 cents in the third quarter of 2015. Improved performance of various projects, including the New York runway reconstruction project, was offset by unfavorable adjustments associated with several electrical projects in New York as well as lower contributions from certain higher-margin civil projects.
Barring the other two segments, the company’s Specialty Contractors segment witnessed decline in revenues, both sequentially and year to date. The decrease for both periods was due primarily to lesser activity on electrical projects at the World Trade Center and mechanical projects at the United Nations in New York, as well as various smaller electrical projects in the southern U.S.
Notably, the segment’s profitability fell significantly due to losses incurred on a number of Five Star projects. Further, the company will face gross profit write-downs regarding rejection of the appeal pertaining to the da Vinci French tunnel in Washington.
Tutor Perini has maintained its revenue outlook in the range of $5–$5.5 billion for 2015. The company is, however, re-evaluating its previous 2015 earnings guidance of $1.90–$2.10 per share. Tutor Perini will provide an update in the near future, taking into account the litigation-related charges, year-to-date results and outlook for the rest of the fiscal year.
In addition, Tutor Perini is exposed to cut-throat competition in the construction industry. Significant slowdown in economic conditions will also affect growth.
Moreover, most of the estimates for this Zacks Rank #3 (Hold) stock have moved south 7.6% over the past 60 days to currently stand at $1.70. The estimate for 2016 has also followed suit, with the Zacks Consensus Estimate down 1.2% to $2.38.
Stocks to Consider
Better-ranked stocks in the same industry include Dycom Industries Inc. DY, Granite Construction Incorporated GVA and Sterling Construction Co. Inc. STRL.
While Dycom sports a Zacks Rank #1 (Strong Buy), both Granite Construction and Sterling Construction carry a Zacks Rank #2 (Buy).
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