Tutor Perini's Q2 marks near-record backlog, new group CEO

Dive Brief:

General contractor Tutor Perini announced its second-quarter 2019 earnings, and, despite a decline in its quarter-over-quarter gross profit — from $118.6 million to $100.9 million — the company booked a near-record backlog, along with gross revenue of more than $1.1 billion, up slightly from the same period last year.
Tutor Perini Chairman and CEO Ronald Tutor said that the company's Q2 results were negatively impacted by delays on large projects like the California High-Speed Rail Authority's $20 billion bullet train and the company's $1.4 billion Newark Airport Terminal One contract in New Jersey. Jean Abiassi, former president and COO of Zachry Construction Corp., will take over as president and CEO of Tutor Perini's Building and Specialty Contractors groups, the latter of which Tutor said exhibited "very poor performance" in Q2.
The company recorded $916 million of new contracts in Q2 and had a backlog of $11.4 billion, up 31% year-over-year. About 75% of Tutor Perini's backlog is made up of "higher-margin" specialty and civil contracts, and Tutor said the firm's "long-term outlook for revenue growth and increased earnings is as positive as ever."

Dive Insight:

Tutor Perini won its $985 million bullet-train contract in 2013 for 29 miles of the high-speed system between the California cities of Madera and Fresno. Since then, the company has received a $63 million change order after it was forced to demobilize and then remobilize when the CHSRA failed to secure enough of the necessary land for Tutor Perini to perform its work.

In last week's conference call with analysts, Tutor said it was still seeing delays in that regard, but that basic balance of rights of way should be turned over by the fourth quarter of this year. Tutor said payment on yet another change order for the project was due this month and called it a "very significant and equitable settlement."

Tutor did not mention if that change order also included the demolition, redesign and construction of a bridge along the new bullet train's route. In June of last year, the CHSRA directed Tutor Perini to demolish a partially constructed bridge that used mechanically stabilized, earth-wall structures in favor of one that uses cast-in-place abutments. The redesign applies to an additional three bridges as well. Tutor Perini said the authority approved the first design, so it would be surprising if the company did not pursue it as a change order.

In addition, Tutor hinted that the company has just ended a "major negotiation for a very large project" in the Bay Area and that a "major" change order is imminent. Tutor Perini has been embroiled in disputes with the San Francisco Municipal Transportation Agency (SFMTA) around contract changes on the $1.6 billion Central Subway project for some time. In fact, an independent federal monitor in a recent report pointed to the contractor's contentious relationship with the agency as a major factor in the project's delays and likely budget overruns.