Tutor Perini Corporation is a construction services company, offering general contracting, construction management and design-build services to corporate clients and government agencies worldwide.TPC offers general contracting, preconstruction planning and project management, including the planning and scheduling of the manpower, equipment, materials and subcontractors required for a project. TPC also offers self-performed construction services including site work, concrete forming and placement, steel erection, electrical and mechanical, plumbing and heating, ventilation, and air conditioning.
Tutor Perini [NYSE:TPC] August 11, 2009 close: $17.78
52-week range: $10.21 (Mar. 9, 2009) - $31.13 (Aug. 12, 2008)
TPC reported $1.59 /share in their first half versus $1.94 in the same six months of 2008. Management projects full-year EPS of $2.60 - $2.70. At Tuesday’s close of $17.78 the P/E is just 6.8x current year’s expectations.
During the boom year 2007 the company earned an all-time record of $3.54 /share and the peak trade was $75.43. Exactly one year ago TPC traded as high as $31.13. Standard and Poor’s assigns TPC a ‘Fair Value’ of $25.20 /share.
These are volatile shares. Beta is 1.60 and earnings are cyclical. After bottoming with the market at $10.21last November, TPC saw a bounce to $26.60 in January this year. Now, they’re back to what looks like a bargain level.
Here are the per share numbers from continuing operations as reported by Value Line:
Year.........Sales...........C/F ........EPS ........ B/V .............Avg. P/E
2004........73.01 ....... 1.55 ......1.39........ 6.34 .............. 9.9x
2005........66.58 ........0.37 ......0.20 ........6.86...............NMF
2006.......114.59 .......1.85 ......1.54.........9.18...............17.2x
2007 ......171.50 .......3.94 ......3.54........13.65..............13.9x
2008 ......117.14 .......1.72 ......2.07 .......23.56 .............14.3x
The last time Tudor Perini had a multiple lower than today’s was back in 2003. Owners of TPC saw their shares surge from a 2003 low of $3.62 to $19.99 by the March of 2004 and to $33.47 by early 2006.
Here’s a pretty conservative way to play this nice small-cap stock out to January 15, 2010.
.....................................................................Cash Outlay ........... Cash Inflow
Buy 1000 TPC @ $17.78 ............................... $17,780
Sell 10 TPC Jan. $17.50 Calls @ $2.60 ..........................................$2,600
Sell 10 TPC Jan. $17.50 Puts @ $1.90 ..........................................$1,900
Net Cash Out-of-Pocket...................................$13,280
If TPC shares merely remain above $17.50 through Jan. 15, 2010:
The $17.50 calls will be exercised.
You will sell your shares for $17,500.
The $17.50 puts will expire worthless.
You will have no further option obligations.
You will end up with no shares and $17,500 in cash.
That’s a best-case scenario profit of $4,220 / $13,280 =31.7%
achieved in about 5.5 months on shares that:
> Went up.
> Stayed unchanged.
> Dipped no lower than $17.50.
What’s the risk?
If TPC shares finish below $17.50 on Jan. 15, 2010:
The $17.50 calls will expire worthless.
The $17.50 puts will be exercised.
You will be forced to buy another 1000 shares.
You will need to lay out an additional $17,500 in cash.
You will have no further option obligations.
You will end up with 2000 TPC shares.
What’s the break-even on the whole trade?
On the first 1000 shares it’s their $17.78 purchase price
less the $2.60 /share cal premium = $15.18 /share.
On the ‘put’ shares it’s the $17.50 strike price less
the $1.90 /share put premium = $15.60 /share.
Your overall break-even would be $15.39 /share.
TPC shares could fall by $2.39 or (-13.4%) without causing a
loss on this trade.
Note: For more upside consider using $20 options for the puts/calls or both.
Disclosure: Author is long TPC shares and short TPC options.
Tutor Perini [NYSE:TPC] August 11, 2009 close: $17.78
52-week range: $10.21 (Mar. 9, 2009) - $31.13 (Aug. 12, 2008)
TPC reported $1.59 /share in their first half versus $1.94 in the same six months of 2008. Management projects full-year EPS of $2.60 - $2.70. At Tuesday’s close of $17.78 the P/E is just 6.8x current year’s expectations.
During the boom year 2007 the company earned an all-time record of $3.54 /share and the peak trade was $75.43. Exactly one year ago TPC traded as high as $31.13. Standard and Poor’s assigns TPC a ‘Fair Value’ of $25.20 /share.
These are volatile shares. Beta is 1.60 and earnings are cyclical. After bottoming with the market at $10.21last November, TPC saw a bounce to $26.60 in January this year. Now, they’re back to what looks like a bargain level.
Here are the per share numbers from continuing operations as reported by Value Line:
Year.........Sales...........C/F ........EPS ........ B/V .............Avg. P/E
2004........73.01 ....... 1.55 ......1.39........ 6.34 .............. 9.9x
2005........66.58 ........0.37 ......0.20 ........6.86...............NMF
2006.......114.59 .......1.85 ......1.54.........9.18...............17.2x
2007 ......171.50 .......3.94 ......3.54........13.65..............13.9x
2008 ......117.14 .......1.72 ......2.07 .......23.56 .............14.3x
The last time Tudor Perini had a multiple lower than today’s was back in 2003. Owners of TPC saw their shares surge from a 2003 low of $3.62 to $19.99 by the March of 2004 and to $33.47 by early 2006.
Here’s a pretty conservative way to play this nice small-cap stock out to January 15, 2010.
.....................................................................Cash Outlay ........... Cash Inflow
Buy 1000 TPC @ $17.78 ............................... $17,780
Sell 10 TPC Jan. $17.50 Calls @ $2.60 ..........................................$2,600
Sell 10 TPC Jan. $17.50 Puts @ $1.90 ..........................................$1,900
Net Cash Out-of-Pocket...................................$13,280
If TPC shares merely remain above $17.50 through Jan. 15, 2010:
The $17.50 calls will be exercised.
You will sell your shares for $17,500.
The $17.50 puts will expire worthless.
You will have no further option obligations.
You will end up with no shares and $17,500 in cash.
That’s a best-case scenario profit of $4,220 / $13,280 =31.7%
achieved in about 5.5 months on shares that:
> Went up.
> Stayed unchanged.
> Dipped no lower than $17.50.
What’s the risk?
If TPC shares finish below $17.50 on Jan. 15, 2010:
The $17.50 calls will expire worthless.
The $17.50 puts will be exercised.
You will be forced to buy another 1000 shares.
You will need to lay out an additional $17,500 in cash.
You will have no further option obligations.
You will end up with 2000 TPC shares.
What’s the break-even on the whole trade?
On the first 1000 shares it’s their $17.78 purchase price
less the $2.60 /share cal premium = $15.18 /share.
On the ‘put’ shares it’s the $17.50 strike price less
the $1.90 /share put premium = $15.60 /share.
Your overall break-even would be $15.39 /share.
TPC shares could fall by $2.39 or (-13.4%) without causing a
loss on this trade.
Note: For more upside consider using $20 options for the puts/calls or both.
Disclosure: Author is long TPC shares and short TPC options.
