Seaport Global Securities Upgrades Tutor Perini Corporation (TPC) to Buy
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Seaport Global Securities upgraded Tutor Perini Corporation (NYSE: TPC) from Accumulate to Buy and maintained a price target of $26, saying valuation is more compelling in light of stronger cash from ops.
Analyst Ryan Cassil commented, "We have adjusted our 2016/2017 estimates, and are upgrading our rating on TPC shares to Buy (from Accumulate) with an unchanged $26 price target. This follows recent weakness in TPC shares that has come about despite our thesis for balance sheet improvement, which we believe will eliminate about 3.0x P/E multiple points of valuation discount while several catalysts for 2017 civil orders continue to play out. In a series of filing releases this morning, TPC announced the refinancing of its 2018 7.625% senior notes and revolver with $500MM in senior notes due 2024 and an anticipated $90MM in cash from operations during Q3:16 (along with $1.33B in sales and $80MM in Adj. EBITDA. While Adj. EBITDA was $2.5MM light of our prior estimate, we note that our expectations for revenue/bookings in civil were fairly low heading into the quarter as we believe spending delays ahead of the election and timing of large award announcements were pushing expectations to the right. Our new 2016 estimates remain at the low end of prior guidance as our expectations for Q4:16 remain modest that the possibility of non-cash charges associated with refinancing and other balance sheet-related improvements are incrementally higher than when guidance was initiated. We have been focused on TPC's second-half balance sheet improvement opportunity, specifically its ability to convert receivables in the second half after $95MM of cost and earnings in excess of billings receivable. The implied $62MM in implied receivables conversion is a strong indicator that the collection cycle at TPC is on the mend, and we are incrementally more confident cash collections will accelerate into 2017. We see the refinancing of senior notes and 70%+ improvement in YoY cash generation as a driver of multiple expansion versus the peer group and an opportunity for investors to see balance sheet improvements beginning to take hold. While the terms of the debt refinancing are not set, we believe the annualized earnings savings could be in excess of $0.12/share."
Shares of Tutor Perini Corporation closed at $19.15 yesterday.
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