Shares of Tutor Perini Corporation TPC gained 9.45% to close at $30.91 yesterday on the back of 6% year-over-year increase in its first-quarter earnings to 33 cents per share. Tutor Perini delivered a solid earnings surprise, beating the Zacks Consensus Estimate of 20 cents by 65%. Volume increase in the Civil segment led to the year-over-year improvement.
Operational Updates
Total revenue went down 4% year over year to $955 million, missing the Zacks Consensus Estimate of $1,050 million. The decline was mainly due to decreased activity on hospitality and gaming projects in California, Arizona, Nevada and Louisiana, which was partially offset by the ramp-up of civil and building projects at Hudson Yards in New York and a rail transportation project in California. The severe winter also affected revenues in the quarter as it impacted several projects in the northeastern U.S.
Barring Civil, which witnessed a 23% increase in revenues to $292 million, revenues declined across the other two segments. The Building segment suffered the worst with a 31% decline to $311 million, followed by Specialty Contractors with a 3% dip to $292 million.
Cost of sales decreased 5% to $850 million from $892 million in the year-ago quarter. Gross profit rose 5% year over year to $105 million. Gross margin improved 90 basis points (bps) to 11%.
General and administrative expenses decreased 1% year over year to $64 million. Operating profit was $41 million, up 15% from $36 million in the year-ago quarter. Operating margin was 4.3%, a 70 basis-point improvement from 3.6% in the year-ago quarter.
Financial Updates
As of Mar 31, 2014, cash and cash equivalents were $133 million versus $120 million as of Dec 31, 2013. Cash used in operating activities was $41 million in the reported quarter compared with the prior-year quarter usage of $84 million. Cash usage in the first quarter was due to the timing of payments primarily in the Civil and Building segments.
Long-term debt, excluding the current portion, amounted to $698 million as of Mar 31, 2014, compared with $619 million as of Dec 31, 2013. The debt-to-capitalization ratio was at 39% as of Mar 31, 2014 compared with 37% as of Dec 31, 2013.
Backlog and Pending Orders
Total backlog as of Mar 31, 2014, was $7.7 billion, up 38% year over year. In the quarter, additions to backlog worth mentioning were ??? 2 New York MTA East Side Access projects valued at $844 million, a $113 million technology building project in California, a $92 million I-564 Intermodal Connector design-build project in Virginia, and a $74 million wastewater treatment project in New York.
Outlook
Tutor Perini maintained its earnings per share guidance range of $2.20 to $2.40 in 2014 and revenues guidance in the range of $4.5–$5 billion.
Tutor Perini will benefit from the strong backlog which is currently at the highest level since 2008. The company continues to win contracts and has the prospects of winning future awards, given its significant volume of pending awards. Building segments and margins are also expected to grow over the next year, driven primarily by the additional phases of the Hudson Yards projects.
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 retains a Zacks Rank #3 (hold). A better-ranked stock in the building and heavy construction industry worth considering is EMCOR Group Inc. EME with a Zacks Rank #2 (Buy).
Peer Performance
One of Tutor Perini's peers, Chicago Bridge & Iron Company N.V. CBI posted first-quarter adjusted earnings of 87 cents per share, 22.3% below the Zacks Consensus Estimate of $1.12 per share. Adjusted net income, however, improved 12% year over year on the back of strong project activities during the quarter.
Primoris Services Corporation PRIM reported first quarter earnings of 21 cents, up 11% year over year and a penny ahead of the Zacks Consensus Estimate.
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