Tutor Perini's Q3: Operating cash, revenue, profit and backlog all up

Dive Brief:

Tutor Perini posted record quarterly operating cash of $222.9 million for its third quarter of 2019, driven by both the company's ability to manage working capital and collect on disputed invoices, the Sylmar, California-based general contractor said. The company said it expects to reach a resolution on additional disputed invoices in the next months, which will add to its operating cash flow.
Revenue for the quarter was $1.2 billion, up slightly from the $1.1 billion recorded for Q3 2018. Construction operating income was $47.9 million, an increase from $47.3 million reported for the same period a year ago. However, as of the end of September, Tutor Perini had a $10.9 billion backlog of work, a 28% increase from Sept. 30, 2018.
Looking forward, however, Tutor Perini reduced its 2019 earnings per share (EPS) guidance to reflect a loss of between $5.01 to $5.16 per share instead of the previous expected loss of between $4.77 and $4.97 per share. The company anticipates that adjusted EPS will be between $1.40 to $1.55, down from an earlier prediction of between $1.60 to $1.80.

Dive Insight:

The company credited its civil division with driving much of its revenue growth but said that other large projects moderated that growth. The sales split was $591.9 million for the civil division; $421.2 million for building and $249.5 million for its specialty contractor segment.

Tutor Perini's change orders and new business totaled $690 million in the third quarter of 2019 and included:

A $178 million U.S. military facilities project in Guam;
Three electrical projects in Texas totaling $99 million; and
$59 million of incremental funding for an education building in California.

Looking ahead, the Division 20 Portal Widening and Turnback Facility in Los Angeles and the Miami-Dade County Courthouse, both projects totaling more than $700 million, should add to the fourth-quarter's backlog.

The $1.6 billion Central Subway project for the San Francisco Municipal Transportation Agency is one of the projects for which Tutor Perini has claimed change orders and, in September, received a change increasing its contract by $31.2 million. In the second quarter, the SFMTA paid $29.7 million toward that amount.

President and CEO Ron Tutor said on the company's Q3 earnings call that it is still in negotiations for disputed change orders with the SFMTA and other customers but expects to have those claims resolved by the end of March 2020. The most significant claim, he said, is with the Washington DOT for work performed on the tunnels for the Alaskan Way Viaduct project in Seattle, a case that should reach its conclusion by mid-December. The SFMTA claims should be resolved by the end of January.

A major point of contention between Tutor Perini and the SFMTA was the type of track installed by one of the company's subcontractors. The SFMTA said it had specified high-strength steel, not the standard-strength steel the subcontractor used. The SFMTA wanted Tutor Perini and its subcontractor to absorb the estimated $2.6 million cost of replacing the track at their own expense, a change estimated at $2.6 million, but documents revealed by The San Francisco Examiner indicated that the SFMTA might have known at an early point in the schedule that the subcontractor was not going to use high-strength steel.