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Granite Construction to Add $31M to Q2 Backlog - Analyst Blog

By: Zacks.com
Posted: 6/11/2014 5:40:00 PM
Referenced Stocks: GVA;EME;TPC;STRL

Granite Construction Incorporated ( GVA ) will book $31 million in the second quarter backlog pertaining to its 41% share in the $75 million bridge reconstruction and widening contract win. The contract was awarded by the Illinois Tollway to a joint-venture between Granite Construction's subsidiary, Kenny Construction Company and Edward Kraemer & Sons Inc.

The scope of the project entails construction of two new bridge structures. This will increase capacity of the Fox River Bridge from 6 lanes to 8 lanes with full shoulders to accommodate the new, wider Interstate 90 roadway. The bridge structures will be 1,315-feet long and stand 40-feet above the surface of the Fox River and have 8 spans supported by 7 piers, lower than the existing 14 piers. The lesser number of piers will help reduce the environmental impact on the waterway and forested fen underneath.

The project will commence from June 2014 and is slated to be completed by the end of 2016. During the project tenure, the bridge will remain open with three lanes in each direction being maintained during peak hours.

Earlier this month, Granite Construction was awarded a $48 million runway rehabilitation contract by the Alaska Department of Transportation and Public Facilities. On Apr 30, Granite Construction reported adjusted first-quarter loss per share of 49 cents improving from the year-ago quarter's loss per share of 57 cents.

The company's net sales nudged up 0.3% year over year to $380 million as increase in Large Project Construction and Construction Material sales were offset by declines in the Construction and Real Estate segments. Total contract backlog increased to $2.6 billion as of Mar 31, 2014 from $2.5 billion as of Dec 31, 2013 and $2.4 billion as of Mar 31, 2013.

For 2014, Granite Construction expects revenues in the range of $2.4 billion to $2.8 billion. Gross profit is expected to improve significantly over the 2013 level. Consolidated EBITDA margin is projected in the range of 5% to 7%.

Granite Construction's backlog, project funding and financing have improved and private constructions are also showing signs of growth. Furthermore, underground diversification opportunities in power and tunnel position the company for growth.

The backlog at quarter end reflects a diverse, healthy portfolio of projects which bodes well for the company. Both the Construction and Large Project Construction segments are expected to gain momentum starting second quarter with Large Project recognition later in the year, driving overall performance in 2014.

Watsonville, CA-based Granite Construction is a leading infrastructure contractor and construction materials producing company. Its project teams are the best in the industry, serving both public and private-sector clients in transportation, power, federal, tunneling, underground, industrial/mining and water resources markets.

Granite Construction currently carries a short-term Zacks Rank #3 (Hold). Some better-ranked stocks in the building and heavy construction industry worth considering are EMCOR Group Inc . ( EME ), Sterling Construction Co. Inc. ( STRL ) and Tutor Perini Corp. ( TPC ). All of these carry a Zacks Rank #2 (Buy).


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