Tutor Perini ‘negatively impacted’ by legal issues, canceled work

Dive Brief:

Los Angeles-based contractor Tutor Perini on Wednesday posted lower revenue and earnings for 2022 compared to the year before, as adverse legal rulings and the loss of major project awards cut into its bottom line.
The firm’s revenue for 2022 stood at $3.8 billion, down 18% from 2021. It posted a net loss for 2022 of $210 million, significantly lower than its 2021 net income of $91.9 million, as COVID-19 impacts continued to sap its pipeline of work.
The company’s backlog stood at $7.9 billion in December 2022, down 3.7% compared to $8.2 billion the same period last year. Tutor Perini Chairman and CEO Ronald Tutor said in an earnings call Wednesday that the pandemic delayed project bidding and awards for most of 2020 and 2021 and induced customer budgetary constraints, but expects many lost or delayed projects to be re-bid in 2023 or 2024.

Dive Insight:

Tutor was frank about the difficulties the firm encountered last year.

“Our revenue was down considerably compared to 2021 due to a lack of large new civil segment awards over the past few years, primarily caused by the effects of the COVID-19 pandemic,” said Tutor in the earnings call. “A combination of adverse legal judgments, settlements and other charges negatively impacted our earnings across all segments in 2022, particularly the Specialty Contractors segment.”

Owners scrapped several projects in the past year that Tutor Perini had won, including the AirTrain at LaGuardia Airport in New York City, which had ballooned more than five times its initial price tag to $2.4 billion, and the Capital Beltway widening project in the Washington, D.C., area, which had long been the subject of environmental lawsuits.

“We were extremely disappointed to learn last week that Accelerate Maryland Partners will not be proceeding with the Maryland express lane project, which we believe would have added several billion dollars to our backlog later this year,” said Tutor. “However, we are hopeful that we will have another chance to pursue this project as it goes out in the future, probably as a design-bid-build.”

Tutor said the company had lost $11 billion in potential new work in the past two years, and added, "That's more low bids than we've lost in the history of the company over 50 years." It had come in as a low bidder on numerous projects that had been subsequently scrapped because they were nonetheless over the owner’s budget.

Adverse legal rulings, especially in New York, were another key issue that ate away at profits, according to Tutor. To address this, last year the company settled suits, axed and replaced leaders and overhauled collections and operations in its specialty contractors segment in New York.

In Q4 of 2022, the company posted revenue of $907 million, down 12.5% from the same period last year and missing analysts’ expectations by nearly $70 million, according to Seeking Alpha. It saw a profit loss of $93 million in Q4 2022, down 417% from $29 million for Q4 2021. Tutor Perini stock fell about 6% on March 15, and was down 36% over the past month.

Better days ahead?

Still, the company sees positive signs ahead, and said it has several pending significant new projects expected in 2023 with a combined value of around $3 billion. The firm is pursuing various large projects on the West Coast and in the Northeast, Hawaii and Guam that are expected to be bid or awarded in 2023 and 2024.

“Clearly we had a challenging and disappointing year overall from an earnings perspective, but as Ron mentioned, we anticipate a return to revenue growth and positive earnings in 2023 with significantly better results expected in 2024 and thereafter,” said Gary Smalley, Tutor Perini executive vice president and CFO, in the call.

The firm also expects a boost from the Infrastructure Investment and Jobs Act in 2023 and in the years ahead. The law will fund many new and existing large infrastructure projects that the firm is already involved with or will be pursuing, Tutor said on the call. Other public firms have reported they are already seeing IIJA money flow to projects.

New awards the company landed in 2022 include:

$466 million of additional funding for a mass-transit project in California.
$260 million Eagle Mountain-Woodfibre Gas Pipeline project in British Columbia, Canada.
$211 million of additional funding for two educational facility projects in California.
$126 million for military facilities in Puerto Rico.
$118 million of additional funding for a mass-transit project in the Midwest.
$107 million for military housing in Guam.