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Contract Wins Strengthen TPC's Prospects, High Costs Ail
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Tutor Perini Corporation (TPC - Free Report) is benefiting from solid contract wins in large mega-construction projects with limited market competition. The company’s growing backlog supports its long-term growth in a dynamic economic environment. Also, the increasing flow of awards enables TPC to improve its margins and lower its total debt.
However, the increased expense structure due to higher share-based compensation and several unfavorable adjustments raises concerns for the company.
Factors Driving Growth
Tutor Perini’s efficient project execution, diversified delivery methods and services have aided it in securing new contracts and awards consistently. At the end of June 30, 2024, TPC’s backlog was $10.42 billion, which was up from $9.98 billion as of March 31, 2024, and from $10.16 billion on Dec. 31, 2023. The company’s top line is being favored by ongoing contract wins and a growing backlog. In the first half of 2024, revenue increased 21% to $2.18 billion year over year.
Some of the significant recent award wins of the company include an approximately $1.66-billion contract from the Honolulu Authority for Rapid Transportation for the City Center Guideway and Stations Project in Honolulu, Hawaii; and a $1.3-billion Connecticut River replacement bridge project for Amtrak, which it received in a joint venture with the O&G Industries. (read more: Tutor Perini (TPC - Free Report) Wins $1.66B Contract, Fortifies Q3 Backlog).
TPC operates in a limited competition environment for large or mega construction projects. A small pool of contractors with the necessary physical and financial resources leads to minimal competition for the company during the bidding process. This favorable scenario enhances its chances of winning new contracts and improving margins.
Looking ahead, Tutor Perini expects an increase in the project pipeline for large projects in the second half of 2024, continuing into 2025 and 2026, supported by well-funded capital spending plans from state, local and federal customers.
The company, which shares space with EMCOR Group, Inc. (EME - Free Report) , Dycom Industries, Inc. (DY - Free Report) and Granite Construction Incorporated (GVA - Free Report) , has made significant efforts to reduce total debt in recent quarters. A consistent trajectory of solid contract wins and favorable market demand trends have driven top-line growth, generating significant cash. These developments have allowed TPC to make substantial progress in deleveraging its balance sheet, enhancing its financial stability.
As of June 30, 2024, Tutor Perini has successfully reduced its total debt by 25%, bringing it down to $676 million from $900 million on Dec. 31, 2023. The company plans to continue this trend by using any excess cash generated in 2024 and 2025 to further lower its total debt.
Concerns for TPC
The company is facing rising operational costs, indicating financial challenges within its cost structure. This increase in costs can impact overall profitability and highlights the need for effective expense management. During second-quarter 2024, the cost of operations increased 5.6% year over year and reached $1 billion. Also, corporate general and administrative (G&A) expenses rose to $32 million, up from $19 million reported in the year-ago quarter. This increase is attributed to higher share-based compensation expenses.
A Brief Review of the Other Stocks
EMCOR is benefiting from a continued strong mix and pipeline of projects in large and growing market sectors with long-term secular trends, including high-tech and traditional manufacturing, network and communications, institutional and healthcare. Also, the Fed’s rate cut is likely to bolster the infrastructure market by lowering borrowing costs, enhancing project viability, encouraging investment and stimulating economic growth. However, macroeconomic woes and volatile pricing are major concerns.
Dycom Industries has been capitalizing on the secular demand for high-speed connectivity, AI-driven infrastructure expansion and significant government funding. With the U.S. government’s push for expanded broadband access and 5G network build-outs continuing to gain momentum, Dycom is well-positioned to benefit from these trends going forward. However, the deceleration in growth, integration challenges, short-term woes in the wireless sector and BEAD program delays, potential impacts from weather and customer slowdowns are concerns.
Granite Construction has been consistently receiving contracts on the back of its solid execution efforts. Also, it has been diversifying and expanding its business through acquisitions and investments. On Aug. 12, 2024, it announced the acquisition of Dickerson & Bowen, Inc. (D&B), a leading regional aggregates, asphalt and highway construction company serving Central and Southern Mississippi. This bolt-on buyout is highly complementary to GVA’s prior acquisition of Lehman-Roberts Company and Memphis Stone & Gravel (LRC and MSG).
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Contract Wins Strengthen TPC's Prospects, High Costs Ail
Tutor Perini Corporation (TPC - Free Report) is benefiting from solid contract wins in large mega-construction projects with limited market competition. The company’s growing backlog supports its long-term growth in a dynamic economic environment. Also, the increasing flow of awards enables TPC to improve its margins and lower its total debt.
However, the increased expense structure due to higher share-based compensation and several unfavorable adjustments raises concerns for the company.
Factors Driving Growth
Tutor Perini’s efficient project execution, diversified delivery methods and services have aided it in securing new contracts and awards consistently. At the end of June 30, 2024, TPC’s backlog was $10.42 billion, which was up from $9.98 billion as of March 31, 2024, and from $10.16 billion on Dec. 31, 2023. The company’s top line is being favored by ongoing contract wins and a growing backlog. In the first half of 2024, revenue increased 21% to $2.18 billion year over year.
Some of the significant recent award wins of the company include an approximately $1.66-billion contract from the Honolulu Authority for Rapid Transportation for the City Center Guideway and Stations Project in Honolulu, Hawaii; and a $1.3-billion Connecticut River replacement bridge project for Amtrak, which it received in a joint venture with the O&G Industries. (read more: Tutor Perini (TPC - Free Report) Wins $1.66B Contract, Fortifies Q3 Backlog).
TPC operates in a limited competition environment for large or mega construction projects. A small pool of contractors with the necessary physical and financial resources leads to minimal competition for the company during the bidding process. This favorable scenario enhances its chances of winning new contracts and improving margins.
Looking ahead, Tutor Perini expects an increase in the project pipeline for large projects in the second half of 2024, continuing into 2025 and 2026, supported by well-funded capital spending plans from state, local and federal customers.
The company, which shares space with EMCOR Group, Inc. (EME - Free Report) , Dycom Industries, Inc. (DY - Free Report) and Granite Construction Incorporated (GVA - Free Report) , has made significant efforts to reduce total debt in recent quarters. A consistent trajectory of solid contract wins and favorable market demand trends have driven top-line growth, generating significant cash. These developments have allowed TPC to make substantial progress in deleveraging its balance sheet, enhancing its financial stability.
As of June 30, 2024, Tutor Perini has successfully reduced its total debt by 25%, bringing it down to $676 million from $900 million on Dec. 31, 2023. The company plans to continue this trend by using any excess cash generated in 2024 and 2025 to further lower its total debt.
Concerns for TPC
The company is facing rising operational costs, indicating financial challenges within its cost structure. This increase in costs can impact overall profitability and highlights the need for effective expense management. During second-quarter 2024, the cost of operations increased 5.6% year over year and reached $1 billion. Also, corporate general and administrative (G&A) expenses rose to $32 million, up from $19 million reported in the year-ago quarter. This increase is attributed to higher share-based compensation expenses.
A Brief Review of the Other Stocks
EMCOR is benefiting from a continued strong mix and pipeline of projects in large and growing market sectors with long-term secular trends, including high-tech and traditional manufacturing, network and communications, institutional and healthcare. Also, the Fed’s rate cut is likely to bolster the infrastructure market by lowering borrowing costs, enhancing project viability, encouraging investment and stimulating economic growth. However, macroeconomic woes and volatile pricing are major concerns.
Dycom Industries has been capitalizing on the secular demand for high-speed connectivity, AI-driven infrastructure expansion and significant government funding. With the U.S. government’s push for expanded broadband access and 5G network build-outs continuing to gain momentum, Dycom is well-positioned to benefit from these trends going forward. However, the deceleration in growth, integration challenges, short-term woes in the wireless sector and BEAD program delays, potential impacts from weather and customer slowdowns are concerns.
Granite Construction has been consistently receiving contracts on the back of its solid execution efforts. Also, it has been diversifying and expanding its business through acquisitions and investments. On Aug. 12, 2024, it announced the acquisition of Dickerson & Bowen, Inc. (D&B), a leading regional aggregates, asphalt and highway construction company serving Central and Southern Mississippi. This bolt-on buyout is highly complementary to GVA’s prior acquisition of Lehman-Roberts Company and Memphis Stone & Gravel (LRC and MSG).