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Bear of the Day: Tutor Perini (TPC)

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Tutor Perini Corporation (TPC - Free Report) has fallen to a Zacks Rank #5 (Strong Sell) as it guided under analyst estimates for 2018.

Tutor Perini is a civil, building and specialty construction company that serves commercial and government clients. It executes large, complex projects such as the construction of subways and tunnels and casinos and hotels.

It offers general contracting, pre-construction planning and project management and construction services including site work, concrete forming and placement, steel erection, electrical, mechanical, plumbing and heating, ventilation and air conditioning (HVAC).

A Beat in the Fourth Quarter

On Feb 27, Tutor Perini reported fourth quarter and full year 2017 results. It beat the Zacks Consensus by 5 cents, reporting $0.55 versus the consensus of $0.50.

Revenue, however, was flat year-over-year at $1.2 billion in the quarter. It also fell year over year,  coming in at $4.8 billion versus $5 billion in 2016.

However, the backlog, which is a key metric for a construction firm, rose 17% as of Dec 31, 2017 to $7.3 billion, up from $6.2 billion at the end of 2016.

New awards and adjustments rose to $1 billion in the fourth quarter compared to $0.8 billion in 2016.

Its Civil segment also continued to garner new awards. It grew its backlog by 54% in 2017 and finished with a hefty 12% operating margin for the year.

And the news continues to be positive in that segment.

Tutor Perini previously announced new first quarter 2018 civil segment awards, including the $1.41 billion Newark Airport Terminal One Design-Build project and a $172 million mechanical project at the Baruch Houses complex in New York.

Why Is Tutor Perini a Zacks Rank #5 (Strong Sell)?

All the news sounds pretty positive out of that earnings report.

Then why is it a Zacks Rank #5 (Strong Sell)?

The Rank is determined by changes in the analyst estimates.

In this case, the analysts have all cut 2018 full year estimates after the company guided under their consensus.

Tutor Perini guided full year earnings at $1.90 to $2.30 when the Zacks Consensus was at $2.67. While this may be the company being overly conservative, the reality is that the analysts have no choice but to cut their estimates to get in line.

Therefore, 3 estimates have been slashed in the last month, pushing the Zacks Consensus estimate down to $2.20 from $2.67.

That's still earnings growth of 52.8% over 2017, however.

But for the purposes of the Zacks Rank, it usually means the Rank will fall.

Shares Tumbled Over the Last Year

Tutor Perini has been out of favor with investors for the last year. Shares have fallen 25% in that time period.



They now trade with a forward P/E of just 10.6, despite the growing backlog.

If you're interested in owning a construction stock, but want to stay away from the Zacks Rank #5 (Strong Sell) stocks, you may want to look at Dycom Industries (DY - Free Report) . It's a Zacks Rank #2 (Buy). Estimates are being raised for this year and next.

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