It’s Tuesday, so it’s time to cover a name from Barchart’s Top 100 Stocks to Buy that I could see delivering gains for investors over the next 6-12 months.
My wife runs a small construction company, so Tutor Perini (TPC) caught my eye. The California diversified general contractor and design/build services provider finished Monday’s trading in the 30th spot on Barchart’s list. That’s where it finished trading last week, one of the best weeks in several years.
TPC stock currently has a weighted alpha of 173.31, higher than its 52-week gain of 164.23%. This suggests that the stock has momentum heading into the fall.
Here’s why it should keep going.
It’s Not Been a Good Month
The company’s stock performed beautifully through the first seven months, up 161%, and then it reported Q2 2024 results. The analyst estimate for the second quarter was $0.17 a share. Tutor Perini delivered $0.02 on a GAAP basis, an 88% miss against the consensus. Its shares fell 23% on the miss.
There are several things to remember about the earnings miss.
First, very few analysts cover the small-cap stock. Yahoo shows three analysts covering it, while Barchart has two covering TPC, rating it a Strong Buy with a target price of $26.50, 20% higher than where it currently trades.
The second thing to consider is that although it might have reported a GAAP profit of two cents, the non-GAAP adjusted profit was 21 cents, excluding the 19-cent adjustment for the share-based compensation expense, four cents higher than Wall Street’s estimate.
Ten analysts should provide an estimate for investors to take much stock in the forecast. The important thing to remember is that Tutor Perini went from a 72-cent loss in Q2 2023 to a two-cent profit a year later, with revenues 10% higher to $1.13 billion and a backlog of $10.4 billion, $400 million higher than in Q1 2024.
“Our backlog is anticipated to grow significantly during the second half of this year and in 2025, as we pursue and expect to capture our share of various large project opportunities, some of which we have already bid and others that we expect to bid soon,” stated CEO Ron Tutor.
Tutor owns 15.2% of the company. He has a vested interest in it continuing to grow and prosper.
Where It’s Been and Where It’s Headed
If you’re unfamiliar with Tutor Perini, Ron Tutor is the son of one of the company’s founders. Albert G. Tutor founded the A.G. Tutor Company in 1949. Ron Tutor joined in 1963. In 1972, Tutor’s company merged with N.M. Saliba to form Tutor-Saliba Corporation. In 1981, Ron Tutor became the company president. In 2008, it merged with Perini Corporation to form today's business.
The problem with Ron Tutor is that he’s 83. That’s generally too old to run a multi-billion company unless you're Warren Buffett. Last November, the company announced that Tutor would step down as CEO in 2025 to be replaced by Gary Smalley, the current president, who is 18 years younger. Tutor will move into the role of executive chairman.
The biggest thing holding back the company is its ongoing litigation over some of the large-scale infrastructure projects it’s been involved in. While construction disputes are skyrocketing, Tutor believes the business should be free of its litigation troubles by the end of this year.
Further, while large-scale projects have become less attractive to large construction firms because of the potential for unexpected costs and losses, Tutor sees this as an opportunity for the company.
“As competition, as I’ve said time and again, has diminished, we are confident that we win our share of these projects and can continue to grow our backlog substantially over the next 12 to 18 months,” ConstructionDive reported Tutor’s comments from last November.
On Aug. 15, Tutor Perini was awarded a $1.66 billion contract by the Honolulu Authority for Rapid Transit (HART) to design and build six rail stations and approximately three miles of elevated rail guideway in Honolulu.
The project will run from mid-2025 through 2030. Tutor Perini will add it to the company’s third-quarter backlog.
Unless it falls on its ass, I expect profit to continue to rise. The company’s most profitable year was in 2017 when it generated an operating profit of $275 million on $4.76 billion in revenue. In the last 12 months ended June 30, its operating profit was $276 million on $4.26 billion in revenue.
It’s making more from less.
The Bottom Line on Tutor Perini
According to S&P Global Market Intelligence, the company has a trailing 12-month loss of $1.30 a share. That’s expected to turn positive in 2024 ($1.03), $1.67 in 2025, and $2.75 in 2026.
Based on its current share price of $22.19, it trades at 21.5x its 2024 estimate, 13.3x 2025, and just 8.1x the analyst estimate for 2026. Again, we must take this with a grain of salt because so few are covering TPC stock.
However, if you are bullish about American infrastructure construction continuing, TPC stock is a good bet for the next 3-5 years. Unfortunately, it doesn’t have significant options volume -- the 30-day average is just 682 -- or I’d suggest selling puts to generate income while you hunt for a better entry point.
TPC is a buy.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
