Shares of Granite Construction IncorporatedGVA gained over 15% since the company reported its third-quarter 2015 results on Nov 2. Granite Construction's earnings per share improved a whopping 103% year over year to 77 cents from 38 cents in the year-ago quarter. The bottom line, however, missed the Zacks Consensus Estimate of 92 cents.
Operational Updates
Granite Construction's net sales increased 4.4% year over year to $751.4 million but fell short of the Zacks Consensus Estimate of $776.4 million.
Cost of sales went down to $650.5 million from $653 million in the prior year quarter. Gross profit improved 51% to $100.9 million from $66.7 million in the prior-year quarter. Gross margin increased 870 basis points (bps) year over year to 23.6%.
Selling, general and administrative (SG&A) expenses increased 5.7% year over year to $50 million. Granite Construction reported adjusted operating profit of $50.8 million, up significantly from $19.3 million in the prior-year quarter.
Segment Performance
Construction: Net sales increased 4.5% year over year to $427 million. Gross profit increased 31.8% year over year to $64.3 million, driven by strong performance in certain parts of the West and across its Kenny businesses.
Large Project Construction: The segment reported sales of $217 million, up 21% from $179.4 million in the year-ago quarter. Gross profit for the quarter came in at $22.6 million, rising significantly from $5.7 million in the same period last year.
Construction Materials: Net sales in the reported quarter improved 15% year over year to $107 million. The segment reported gross profit of $14 million compared with $12 million in the prior-year quarter, driven by operational efficiencies along with stronger volume across geographies.
Financial Update
Granite Construction ended the quarter with cash and cash equivalents of $221.8 million compared with $255.9 million in the year-ago quarter. As of Sep 30, 2015, long-term debt remained flat at $270 million compared with Sep 30, 2014. Cash flow used in operating activities was $8 million for the period of nine months ended Sep 30, 2015 compared with $46.8 million in the prior-year period. Total contract backlog increased 4% year over year to $3 billion in the reported quarter.
Outlook
Granite Construction retained its 2015 guidance and expects consolidated revenue growth in mid-single digits and consolidated EBITDA margin of 6% to 8%.
Granite Construction is poised to benefit from economic improvement. The company remains focused on opportunities to leverage pent-up demand as the funding environment is progressing. Notably, Granite Construction's sound backlog and several additional awards bode well for its future performance.
Watsonville, CA-based Granite Construction is a leading infrastructure contractor and construction materials producing company. Its project teams represent 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 Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Dycom Industries Inc. DY , Jiangsu Expressway Co. Ltd. JEXYY and Zhejiang Expressway Co. Ltd. ZHEXY . While Dycom sports a Zacks Rank #1 (Strong Buy), Jiangsu Expressway and Zhejiang Expressway carry a Zacks Rank #2 (Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
