Great Lakes Dredge & Dock: Momentum Builds

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About: Great Lakes Dredge & Dock Corporation (GLDD)
by: The Insiders Forum

Summary

Today, we revisit infrastructure play Great Lakes Dredge & Dock.

The company just posted solid third quarter results that ignited a rally in its shares on Tuesday.

We highlight the quarter and provide an updated investment analysis on this small cap concern in the paragraphs below.

Half of the American people have never read a newspaper. Half never voted for President. One hopes it is the same half.” ― Gore Vidal, Screening History

Infrastructure concern Great Lakes Dredge & Dock (GLDD) posted third quarter numbers on Tuesday. Quarterly results showed the company continues to execute well and its business is gaining momentum. The shares rallied some 10% in trading yesterday after its earnings report was posted. Today, we revisit this 'off the radar' small cap concern and provide an updated investment analysis post Q3 results.

Company Overview:

Great Lakes Dredge & Dock Company is the largest provider of dredging services in the country, accounting for approximately half of the domestic dredging bid market share. The firm has been around for more than a century. Currently, the stock has a market capitalization of approximately $400 million and trades near the $6.50 a share level.

Third Quarter Highlights:

  • The company posted earnings of 18 cents a share in a solidly profitable quarter.
  • Revenues rose an impressive 25% on a year-over-year basis to nearly $205 million, approximately $5 million above the consensus forecast.

It was the details of the earnings press release that were the tidbits that helped the stock move higher in trading. Among these were:

  • Adjusted EBITDA from continuing operations was $35.9 million, nearly three times as much as the year ago period.
  • Net income from continuing operations swung to a positive $11.7 million from a loss of $3.2 million in the prior year quarter.
  • Order backlog has grown an impressive $142 million since the start of the year. The company continues to win a string of new contracts including a recent win on a $48 million bid to deepen a channel in the port of Tampa Bay. Great Lakes also expects to receive additional option work items on this contract by early 2019 with an additional value of $25 million.
  • Gross margins in its core dredging business increased to 22.2% in the current quarter from 14.6% in the year ago period.
  • The company is now more than halfway through its efforts to take $40 million in annual operating costs out of the business.

Impressively, the company has paid down $85 million in debt over the past year. This effort and the overall results in general have been helped tremendously by The Ellis Island coming on line earlier this year. This is the company's largest dredging ship and should contribute $20 million to $30 million in annual EBITDA. Completion of this vessel is also why capital expenditures were only $2.3 million this quarter compared to the $12.6 million spent in 3Q2017.

Verdict:

I have had this stock for nearly two years now. I bought my core stake then as valuation was cheap, its turnaround strategy made sense and the upcoming completion of The Ellis Island was going to greatly improve the company's business fundamentals. In addition, insiders were substantial buyers of the stock at that time.

That turnaround seems to have fully taken hold, The Ellis Island is making a solid contribution to the company's bottom line and insiders seem to continue believing in the story as the CEO added over $260,000 in new shares to his stake in August.

Elections belong to the people. It's their decision. If they decide to turn their back on the fire and burn their behinds, then they will just have to sit on their blisters.” ― Abraham Lincoln

Bret Jensen is the founder and author of articles on The Biotech Forum, The Busted IPO Forum, and The Insiders Forum. To receive these articles as published on Seeking Alpha just click the appropriate link and hit the orange follow button.

Disclosure: I am/we are long GLDD.

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.