On Friday, UBS analyst upgraded Tutor Perini Corporation (NYSE:TPC) stock from Neutral to Buy, significantly increasing the price target to $27.00 from the previous $14.00.
The upgrade follows a period of losses for the construction company, which UBS attributes to nonrecurring factors such as COVID-driven delays, extended legal processes, and underperforming legacy projects.
The analyst believes that the market has not fully recognized the potential earnings power of Tutor Perini's core business. The firm anticipates an earnings recovery for Tutor Perini to pre-COVID levels or higher, bolstered by improving demand, balance sheet improvement, and management changes.
Despite the stock's recovery from its low, UBS suggests that the current price does not yet account for more normalized earnings and additional cash flow that is expected in the future. The firm's forecast is based on the assumption of a 6.0-6.5x EV/EBITDA multiple, which is considered a reflection of normalized conditions.
UBS's forecast indicates that the market is pricing in approximately $250 million of EBITDA for the second half of 2025 to the first half of 2026, whereas UBS projects $315 million.
This projection is based on a return to the financial performance levels of 2020-2021, and does not even account for an anticipated increase in backlog beyond the previous peak set in the first quarter of 2019.
In other recent news, Tutor Perini Corporation has been making significant strides in its financial performance and prospects. The company has reported a return to profitability in the first quarter of 2024, with positive earnings per share and a projected continuation of profitability throughout the year. This financial turnaround is largely due to successful claims settlements and dispute resolutions, contributing to a near-record cash flow for the company.
B.Riley has maintained a positive stance on Tutor Perini, upgrading the company's price target to $26.00 from the previous $17.00, citing improved financials and prospects for growth reacceleration. The analyst firm anticipates these developments will drive the company's share price.
In another move, Tutor Perini has completed the redemption of $500 million in senior notes, financed through a new offering of $400 million senior notes due in 2029 and existing cash reserves. This strategic debt reduction and refinancing effort is part of Tutor Perini's broader strategy to manage its debt profile effectively.
Other recent developments include a leadership transition, with the current President, Gary Smalley, set to succeed Ron Tutor as CEO in 2025. This change is seen as a catalyst for continued improvement in the company's profit margins and earnings per share.
Finally, Tutor Perini exceeded Q1 expectations with a 35% growth in consolidated revenue and significant gains in operating margins and earnings per share. The company maintains its 2024 earnings per share guidance of $0.85 to $1.10. These are recent developments in the financial trajectory of Tutor Perini Corporation.
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