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Granite Construction (GVA) Misses on Q4 Earnings & Sales

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Granite Construction Incorporated (GVA - Free Report) reported its fourth-quarter 2016 earnings per share of 40 cents, down 44% year over year from 72 cents in the year-ago quarter. The bottom line also missed the Zacks Consensus Estimate of 53 cents.

Operational Updates

Granite Construction’s net sales increased 5.8% year over year to $666.7 million; however fell short of the Zacks Consensus Estimate of $689 million.

Cost of sales went up to $585.4 million from $529.5 million in the prior-year quarter. Gross profit declined 19% to $81.3 million from $100.6 million in the year-ago quarter, driven primarily by the underperformance of certain large projects as well as by weather impacts across much of the West in December. Gross margin contracted 380 basis points (bps) year over year to 12.2%.

Granite Construction Incorporated Price, Consensus and EPS Surprise

 

Granite Construction Incorporated Price, Consensus and EPS Surprise | Granite Construction Incorporated Quote

Selling, general and administrative (SG&A) expenses edged down 1% year over year to $59 million. Granite Construction reported adjusted operating profit of $21.9 million, down significantly from $40.6 million in the year-earlier quarter.

Segment Performance

Construction: Net sales climbed 5% year over year to $359.7 million. Gross profit declined 8.7% year over year to $61.7 million.

Large Project Construction: The segment reported sales of $246 million, up 10.6% from $222.4 million in the year-ago quarter. Gross profit for the quarter came in at $13.5 million, down from $25.8 million in the same period last year.

Construction Materials: Net sales in the reported quarter were down 8% year over year to $60.9 million. The segment reported gross profit of $6.1 million compared with $7.3 million in the prior-year quarter.

Financial Update

Granite Construction reported cash and cash equivalents of $189 million at the end of 2016, down from $252.8 million as of Dec 31, 2015. Long-term debt was $229.5 million as of Dec 31, 2016 compared with $244 million as of Dec 31, 2015.

Granite Construction reported cash flow from operations of $73 million in 2016 compared with $67 million in 2015. Backlog ended at a year-end record of $3.48 billion, up 19.8% from $2.91 billion in 2015.

2016 Performance

Granite Construction posted earnings of $1.42 per share for 2016, down 6.6% year over year. Earnings also missed the Zacks Consensus Estimate of $1.52. Revenues for full-year 2016 climbed 6% year over year to $2.51 billion. Revenues came in line with the Zacks Consensus Estimate.

Outlook

Granite Construction expects low-double digit consolidated revenue growth in 2017 and consolidated EBITDA margin of 6.5%–7.5%.

Share Price Performance

In the last one year, Granite Construction has underperformed the Zacks classified Building Products - Heavy Construction sub-industry with respect to price performance. The stock gained around 36.4%, while the industry rose 41.4% over the same time frame.



Zacks Rank

Granite Construction currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the sector include Boise Cascade Company (BCC - Free Report) , Louisiana-Pacific Corporation (LPX - Free Report) and LSI Industries Inc. (LYTS - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boise Cascade has an earnings ESP of 436.26% for the trailing four quarters. Louisiana-Pacific has an average earnings surprise of 66.28% for the last four quarters, while LSI Industries has an average earnings surprise of 27.28% for the past four quarters.

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