‘Turning a miserable corner’: 4 things we learned from Tutor Perini’s Q2 results

Image: Tutor Perini

US-based contractor Tutor Perini ranks among the 100 biggest construction companies in the world, according to the latest ICON 200 list.

But the last few years haven’t been plain sailing for the business, which has been mired in long-running disputes and litigation as well as losing out on revenue from major projects for which it was preferred bidder but which were delayed by the covid-19 pandemic.

In 2022, the company suffered an 18% year-on-year drop in revenue to $3.8 billion and sank to a loss of $204.8 million from construction operations.

But as the company last week detailed its financial performance for the second quarter of 2023, chairman and chief executive Ron Tutor told investors that the company was “turning this miserable corner” and that he was looking forward to the future.

His comments came as Tutor Perini’s revenue for Q2 2023 jumped 19% year on year and went over the $1 billion mark, boosted by mass transit projects in California.

As Ron Tutor and chief financial officer Gary Smalley spoke to investors, here’s four things we learned from Tutor Perini’s Q2 2023 financial results:

1) Long-running litigation and disputes near a conclusion:

Tutor Perini has found itself caught up in a series of disputes and litigation that have dragged on the company’s ability to generate cash. The company declined to offer any forward guidance for its performance over the rest of 2023, partly due to the fact that it wants to wait to see how these disputes play out now that they are finally entering their end game.

Ron Tutor was bullish about the company’s prospects of winning many of the disputes and litigation cases in which it is involved.

“We anticipate significantly improved financial results next year and beyond as we conclude and resolve all these long duration disputes and litigations and we collect the capital we have been owed for so long,” he said.

He forecast that the bulk of these disputes would be resolved towards the end of this year and into 2024, with few of any significance remaining in 2025.

He estimated that the total sum of money involved in the disputes was around $200 million. One lawsuit currently going to a three-panel arbitration “tries for well over $100 million”, he added. The result comes in November.

2) New York City ‘an incredibly difficult place to work’:

Tutor noted that it was mechanical and electrical projects in New York City that had generated most of the $70 million loss from operations that the company’s specialty contracting division had experienced.

He said that while other businesses within the segment such as Fisk Electric and Florida-based Nagelbush Mechanical performed consistently well, “New York is an incredibly difficult place to work, with a legal system that effectively protects public agencies”.

He said that it was “very challenging” for contractors to operate in the city and that the situation was causing the business to pull back from bidding for new work.

“We have reached a point where, as one of only two players that can do a major job, we are increasing prices and demanding contract changes. Our specialty group in New York where all of these problems have emanated has been reduced to a fraction of its size and at least for the time being, we are only bidding in support of our civil group,” he added.

3) Work funded by the Inflation Reduction Act will come on stream…but only slowly:

When asked about whether funding from the Inflation Reduction Act, which aims to accelerate the transition to a clean energy economy, was starting to work its way into the market, Ron Tutor indicated that it was but that it is taking its time.

He said, “We don’t think a significant commitment of funds has yet hit the market.”

But he added, “We are in contact with three or four of our major billion-dollar-plus civil jobs that appear to be getting funding and will hit the marketplace for us to propose on in the first and second quarters of next year. So it is having an effect – it has just been happening very slowly.

4) Tutor Perini is optimistic about winning contracts it missed out on due to pandemic:

Tutor claimed that the company missed out on the award of four large projects valued at a total of almost $11 billion where Tutor Perini had been the preferred bidder when those projects were delayed by the covid pandemic.

But he said he believed the company’s revenue had now reached an “inflection point” after covid and was hopeful that the contractor would have the opportunity to capture some of those contracts as they were rebid in 2024 and the first half of 2025.

Opportunities include the $2 billion Honolulu rail transit project, bidding in the first quarter of 2023, where Tutor Perini, for which Tutor said the company was the lowest bidder two years ago.

In October, the company will also be bidding on the $1 billion Federick Douglass tunnel in Maryland, connecting Amtrak’s Penn Station to MARC’s West Baltimore station.

It is also looking at bidding for the $1.5 billion Inglewood people mover in southern California that will connect Downtown Inglewood station on the Los Angeles Metro Rail system to major sports and entertainment venues in the city.

“We anticipate we will capture a significant proportion of these properties, which will provide a foundation for revenue growth and improved profitability,” Tutor said.

He added that the company would focus on growing its civil business, which he expected to be the driver of growth, and pointed to a strong and resilient US economy, with the Bipartisan Infrastructure Law boosting investment in infrastructure.