KeyBanc Finds Tutor Perini's Valuation Attractive, Upgrades Stock

Tutor Perini Corp TPC, a construction company, reported after Tuesday's close a top-and-bottom-line beat in its fourth quarter results, which prompted KeyBanc to turn bullish on the stock.

The Analyst

KeyBanc Capital Markets' Sean Eastman upgraded Tutor Perini's stock from Sector Weight to Overweight with a newly assigned $28 price target.

The Thesis

Tutor Perini's fourth quarter earnings showed its highest margin segment, the Civil segment, rose 54 percent year-over-year and the $1.4 billion Newark Airport Terminal contract win will drive a book-to-bill above 1 times in the first quarter of 2018, Eastman said in a note. The Civil segment backlog showed "strong momentum" in core states and its status as having the highest exposure to the domestic Civil infrastructure segment remains at 78 percent of EBIT.

The earnings report also marked the second consecutive year of a free cash flow recovery after many years of poor performance, Perini said. This could be attributed to management's efforts on cash collections, including a new incentive comp structure which was introduced last spring.

Tutor Perini also guided its 2018 earnings per share to a range of $1.90 to $2.30. Eastman said the company's outlook implies a 25 percent year-over-year EPS growth at the midpoint, which may imply it's at the very least "comfortably achievable," if not beatable.

Price Action

Shares of Tutor Perini were trading higher by 11 percent at $24.45.

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