Tutor Perini Corp (TPC)

Tutor Perini Corp (TPC) is one of the leading construction company in the United States based on revenue. The company offers diversified general contracting, construction management and design-build services to customers globally. The business is conducted through three segments: Civil, Building and Specialty Contractors.

From the graph, we can see that TPC had a disappointing performance in 2019. Revenue has been declining over the years and worse of all, net profit before tax fell from a positive 3.0% to negative 9.6%. The main reasons behind the 2019 performance were due to the goodwill impairment of 379.9 million and the company also received an adverse jury verdict in which TPC recorded a pre-tax charge of 166.8 million in 2019.

However on the bright side, there is an increase of backlogs from 9.3 billion in 2018 to 11.2 billion in 2019 as of 31 Dec. In the construction industry, backlog is a measure of the total value of work that is remaining to be performed on projects that have already been awarded. The increase of 20% in backlog shows that TPC was successful in winning many projects in 2019 and the business was thriving.

Moving forward to 2020, TPC reported the strongest first-quarter revenue growth in the last 10 years. On 16 Jun 2020, Bloomberg reports “Trump Team Weighs $1 Trillion for Infrastructure to Spur Economy”, this news sent a positive impact to the whole economy and especially to the construction material stocks. However, we must continue to monitor the results for the rest of 2020 and see the impact COVID-19 has on TPC’s business.

According to a Reuters article in February 2020, private equity firm Apollo Global Management Inc approached TPC with a close to $1 billion acquisition offer, which translates to around $17 per share. Although the potential acquisition of TPC was terminated in May 2020, we can infer that Apollo Global Management Inc and TPC had the confidence that TPC will recover from its abysmal performance in 2019.

In conclusion, I personally feel that there is quite a high potential upside for TPC at the current price $11.73. However, if you are looking for a high and consistent dividend stock, TPC may not be the one you should be looking for because they do not have a history of paying dividends. It is also not recommended for the faint hearted due to the high volatility of the stock as we can see from the 52 weeks range where the stock price ranges from $2.61 to $19.48.

On the other hand, if you also believe in the capable management of TPC and that they will eventually recover from the 2019 results and the COVID-19 impact, this may be a potential stock for you to consider.

NYSE: TPC (Tutor Perini Corp)

Sector: Construction & Engineering Industry

Current Share Price: $11.73

Intrinsic Value: $15.20 - $16.50

Potential Returns: 30 - 40%

Time Frame: 2 - 5 Years

Date of article written: 11th Jul 2020

Disclaimer: The article contains some of my personal opinions and I do hold some of TPC stocks.