Tutor Perini Oversold
TPC next reports quarterly earnings on Feb. 24, after the market close. On Jan. 22 they pre-announced that FY15 would be significantly below prior guidance. Prior FY15 GAAP EPS guidance had been $1.90-2.10 and was reduced to$ 0.85 to 0.90.
Tutor Perini management’s reasons for the miss were due to significant project charges at Five Star Electric recorded in the third and fourth quarters and a previously disclosed adverse court decision in the third quarter of 2015 related to long-standing litigation from a 2011 acquisition.
They went on to say that they see FY16 diluted EPS of $1.90-2.20, versus Capital IQ non-GAAP consensus of $2.40, and revenue of $5.1 billion to $5.6 billion, versus Capital IQ consensus of $5.37 billion.
It’s unfortunate that everything doesn’t go the right way all the time. TPC had some unanticipated problems with the Five Star Electric contract and made a mistake several years ago buying a company with outstanding liabilities. That’s all behind them now.
I saw the sum of all this information as a great buying opportunity and bought TPC on Jan. 22. With nine times average daily volume, I think TPC is now in strong hands and has already moved up more than 25 percent from the low of $10.16. If it will retrace a little bit, I would like to add more around 12 bucks.
FY16 guidance of $1.90 to $2.20 gives us a forward P/E of 6.7 at today’s closing price of 12.78.
TPC should be back to business as usual with a price of $19.50 within six months and $24 to $26 within 18 months.
Since this little debacle on Jan. 22, Tutor Perini has signed $1.232 billion in new business.