Bear of the Day: Granite Construction (GVA) - Bear of the Day


Granite Construction Incorporated ( GVA ) reported a first quarter loss of 53 cents per share, missing the Zacks Consensus Estimate by a wide margin. This prompted analysts to revise their earnings estimates significantly lower for both 2013 and 2014.

This sent the stock to a Zacks Rank #5 (Strong Sell).

Granite Construction is an infrastructure contractor and construction materials producer. It serves public- and private-sector clients in the transportation, power, federal, tunneling, underground, and industrial/mining and water resources markets.

First Quarter Miss

Granite Construction reported its first quarter results on May 9. Excluding an acquisition, revenues rose 1.5% while the gross profit margin declined 10 basis points to 7.9%. Meanwhile, selling, general and administrative expenses increased 69 basis points to 15.2% of total revenue.

These factors led to a loss of 53 cents per share, well below the Zacks Consensus Estimate of -26 cents. It was the company's second straight earnings miss.

Estimates Falling

Although the backlog for Granite increased from $1.7 billion at year-end to $2.4 billion at the end of Q1, estimates still fell significantly for both 2013 and 2014. This has sent the stock to a Zacks Rank #5 (Strong Sell).

The Zacks Consensus Estimate for 2013 is now $1.12, down from $1.70 just 30 days ago. The 2014 consensus has fallen from $2.82 to $2.39 over the same period.

You can see this negative earnings momentum in the company's 'Price & Consensus' chart:

Granite Construction also carries a long-term "Underperform" Zacks Recommendation.


Shares of GVA currently trade around 15x 12-month forward earnings, which is basically in-line with the industry median. But investors may want to consider some other stocks with better earnings momentum within the 'Building-Heavy Construction' industry. For instance, Primoris Services ( PRIM ) is a Zacks Rank #1 (Strong Buy) stock, and Chicago Bridge & Iron ( CBI ) is a Zacks Rank #2 (Buy).

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service .

CHICAGO BRIDGE (CBI): Free Stock Analysis Report

GRANITE CONSTRU (GVA): Free Stock Analysis Report

PRIMORIS SERVCS (PRIM): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: CBI , GVA , PRIM

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