Paving The Way: Granite Construction

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DLP Investing
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Summary

  • Granite Construction is firing on all cylinders for the first time since 2009.
  • State and Federal funding would provide an enormous catalyst for transportation contractors.
  • With a strong balance sheet and improving income statement, Granite is poised to perform as the economic cycle turns up.

Granite Construction, Inc. (NYSE:GVA) is a Watsonville, CA-based heavy civil contractor that conducts business throughout the lower U.S. 48, Alaska, and Guam. GVA has been in business since breaking off from Granite Rock - a northern California construction materials supplier and builder - in 1922 and began trading publicly in 1990. Granite had built its business by interspersing smaller satellite branch offices and materials plants/quarries throughout California before expanding to take on larger projects throughout the nation. With a solid balance sheet, substantial backlog, and a timely acquisition, Granite Construction is primed for the next up-cycle in U.S. infrastructure construction.

Business Structure

Granite reports financial results in three segments: Construction, Large-Projects Construction, and Materials.

Granite's Large Projects division does work throughout the country. Past projects have spanned all disciplines of construction from the Las Vegas monorail to repairs on bridges along the Gulf of Mexico damaged by hurricane Katrina, to rebuilding lower Manhattan at Ground Zero after the terrorist attacks of September 11, 2001. This division does headline-capturing, high-profile work. The Large Projects division pulled in 37.7% of the company's first-half 2015 revenue, but lagged behind the other two divisions in a number of metrics. Profit margin was only 8.1% for the second quarter on 25.1% less revenue than the same quarter a year before when a 20.8% margin was achieved. The same-quarter last year was a difficult comparison to match for the Large Projects division, as it had included a large claim resolution settlement that went straight to the top and bottom line. The company anticipates $20 billion of upcoming bids from this division over the next couple of years, with $6 billion of that coming by the end of the year. Here are some of the projects noted on the 2Q 2015 earnings presentation:

Granite's Construction division, which does

This article was written by

DLP Investing profile picture
78 Followers
I am a civil engineer and individual investor. I spend a substantial amount of time reading and researching commodities, macro economic trends, and value investing strategies. With my background in the construction industry, I am able to analyze real world information compared to data provided by media outlets. I plan to eventually transition my career towards the financial sector.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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