Dive Brief:
- Tutor Perini saw its profits plunge as a negative legal ruling, accounting rules and the completion of a major airport project conspired to ravage both its net income and revenue during the first quarter of 2023.
- The Los Angeles-based firm reported a loss of $49 million, more than double the $22 million it lost during the first quarter of 2022. Revenue fell 18% from a year earlier to $776 million. Given those adverse impacts to its books, Tutor Perini withdrew its financial guidance going forward.
- Backlog provided something of a silver lining for the contractor, coming in at $7.9 billion, essentially flat from the end of 2022 but down 5% compared to a year ago. The company also said its second quarter was off to a good start, with more than $3.2 billion in awards already booked, including the $2.95 billion Brooklyn jail project announced last week and the $222 million Tinian International Airport project in the Mariana Islands.
Dive Insight:
On a call with Wall Street analysts, CEO and Chairman Ronald Tutor said that the company was feeling the delayed impacts of the pandemic. He harkened back to the $11 billion in lost low bids over the past two years that the company announced during its fourth quarter earnings call. Those wins evaporated as owners grappled with a dramatic rise in construction costs and had to rebudget projects.
“We weren't initially affected by COVID, we worked through it,” Tutor said. “What most people don't realize, and it took us a time to understand, is with none of that $11 billion in low bids being awarded, what should have long been into construction and generating revenue, didn't take place.”
The cumulative result was a dramatic decrease in the firm’s top line results, which “will not increase until we add more large work, as in the New York prison,” Tutor said. When that happens, he said annual revenues should climb back to between $5 billion and $6 billion, a goal the company is “hoping to accomplish by the end of the year.”
Losses piling up
Tutor Perini announced in a Security and Exchange Commision filing in April that it would take an $84 million loss on its George Washington Bridge Bus Station project in the first quarter due to losing a protracted legal battle on the troubled development in the Washington Heights area of Manhattan.
Adding to that was another $28 million negative adjustment on a California mass transit project which the company didn’t name. Tutor said that although the company actually won at least $220 million in additional change orders on the job, those same changes would push out the portion of the project that was complete. Thus, due to percentage-of-completion accounting rules, the firm temporarily needed to recognize the charge.
Finally, with the opening of Newark Liberty International Airport’s Terminal A in January, the company experienced the impacts of that $2.7 billion project winding down.
Despite those headwinds, Tutor said he is optimistic going forward that as the $11 billion in projects that were recalled go back out to bid again, the company will see increased opportunities down the road.
“We continue to believe the demand for our services will remain strong and increase meaningfully as substantial funding from the infrastructure law increasingly flows to our customers this year and next,” Tutor said.
Other awards in the quarter included:
- A $91 million educational facility in California.
- A $75 million facility renovation for the U.S. military in Colorado.
- A $62 million bridge repair in Minnesota.
- $56 million of additional funding for a healthcare project in California.
