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Why You Should Dump Granite Construction (GVA) Stock Now
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Granite Construction Incorporated (GVA - Free Report) , one of the nation’s largest infrastructure contractors and construction materials producers, has been disappointing investors of late. Its shares have dipped 10.6% year to date.
Should investors dump this stock from their portfolio for the time being? Let’s find out.
Negative Estimate Revisions
The estimates for the company for fiscal 2017 and fiscal 2018, have moved south in the last 60 days, reflecting the negative outlook of analysts. For fiscal 2017, the estimate has dropped 10% to $1.81. For fiscal 2018, the estimate has decreased 1% to $2.79 per share.
Q1 Loss, Lackluster Guidance
Granite Construction reported first-quarter 2017 loss per share of 60 cents, wider than the year-ago quarter’s loss per share of 26 cents as well as the Zacks Consensus Estimate of a loss per share of 25 cents. Production at almost all of the facilities of the Construction Materials segment was disrupted due to significant rainfall throughout the West. Production was delayed until material deposits dried for efficient aggregate and asphalt production. Weather also was a headwind for the Construction segment.
In the Large Project Construction segment, first-quarter 2017 performance continued to be challenged by impacts from design, weather, project execution and owner-related issues. During the quarter, the company accelerated work on a number of under-performing, mature projects to complete them in 2017 and 2018. This created an increased drag on segment results which offset steady performance of the newer projects.
The company expects low-double digit consolidated revenue growth in 2017 and consolidated EBITDA margin of 6.5–7.5%.
Falling Behind the Industry
In the past six months, Granite Construction’s stock has dropped 12.1%, wider than the Zacks categorized Building-Heavy Construction sub industry’s decline of 9.5%.
Currently the Building-Heavy Construction sub industry has a Zacks Industry Rank of 203 which places the industry in the bottom 21% of the 250+ groups enlisted.
Negative Surprise History
In the trailing four quarters, the company posted an average negative earnings surprise of 46.32%.
Unfavorable Zacks Rank & Score
Granite Construction currently carries a Zacks Rank #4 (Sell) and a VGM Score of “C”. Here 'V' stands for Value, 'G' for Growth and 'M' for Momentum. The company’s score is a weighted combination of these three scores (Value - F, Growth - D, Momentum - A). A score of ‘A’ or ‘B’ is generally considered favorable and allow investors to rule out the negative aspects of stocks and select the valuable picks.
Expensive Valuation
The company’s stretched valuation is a concern. Granite Construction's trailing twelve months EV/EBITDA ratio is 14.94 while the Zacks categorized Building Products - Heavy Construction industry trailing twelve months EV/EBITDA is pegged much lower at 6.08. This implies that the stock is overvalued and hence, we caution the investors against entering the stock at this point.
Stocks to Consider
Some better-ranked stocks in the construction sector include NCI Building Systems, Inc. , The Sherwin-Williams Company (SHW - Free Report) and Trex Company, Inc. (TREX - Free Report) . NCI Building Systems and Shrwin-Williams boast a Zacks Rank #1 (Strong Buy) while Trex carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NCI Building has an average positive earnings surprise of 11.28% in the trailing four quarters. Its estimates for fiscal 2017 and fiscal 2018 have gone up 3% and 5%, respectively in the past 30 days.
Sherwin-Williams has an average earnings surprise of 2.48% in the last four quarters. In the past 30 days, its estimates for fiscal 2017 and fiscal 2018 have moved up 4% and 15%, respectively.
Trex has delivered an average positive earnings surprise of 7.45% in the trailing four quarters. Its estimates for fiscal 2017 and fiscal 2018 have gone up 1% and 2%, respectively in the past 60 days.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500.
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Why You Should Dump Granite Construction (GVA) Stock Now
Granite Construction Incorporated (GVA - Free Report) , one of the nation’s largest infrastructure contractors and construction materials producers, has been disappointing investors of late. Its shares have dipped 10.6% year to date.
Should investors dump this stock from their portfolio for the time being? Let’s find out.
Negative Estimate Revisions
The estimates for the company for fiscal 2017 and fiscal 2018, have moved south in the last 60 days, reflecting the negative outlook of analysts. For fiscal 2017, the estimate has dropped 10% to $1.81. For fiscal 2018, the estimate has decreased 1% to $2.79 per share.
Q1 Loss, Lackluster Guidance
Granite Construction reported first-quarter 2017 loss per share of 60 cents, wider than the year-ago quarter’s loss per share of 26 cents as well as the Zacks Consensus Estimate of a loss per share of 25 cents. Production at almost all of the facilities of the Construction Materials segment was disrupted due to significant rainfall throughout the West. Production was delayed until material deposits dried for efficient aggregate and asphalt production. Weather also was a headwind for the Construction segment.
In the Large Project Construction segment, first-quarter 2017 performance continued to be challenged by impacts from design, weather, project execution and owner-related issues. During the quarter, the company accelerated work on a number of under-performing, mature projects to complete them in 2017 and 2018. This created an increased drag on segment results which offset steady performance of the newer projects.
The company expects low-double digit consolidated revenue growth in 2017 and consolidated EBITDA margin of 6.5–7.5%.
Falling Behind the Industry
In the past six months, Granite Construction’s stock has dropped 12.1%, wider than the Zacks categorized Building-Heavy Construction sub industry’s decline of 9.5%.
Currently the Building-Heavy Construction sub industry has a Zacks Industry Rank of 203 which places the industry in the bottom 21% of the 250+ groups enlisted.
Negative Surprise History
In the trailing four quarters, the company posted an average negative earnings surprise of 46.32%.
Unfavorable Zacks Rank & Score
Granite Construction currently carries a Zacks Rank #4 (Sell) and a VGM Score of “C”. Here 'V' stands for Value, 'G' for Growth and 'M' for Momentum. The company’s score is a weighted combination of these three scores (Value - F, Growth - D, Momentum - A). A score of ‘A’ or ‘B’ is generally considered favorable and allow investors to rule out the negative aspects of stocks and select the valuable picks.
Expensive Valuation
The company’s stretched valuation is a concern. Granite Construction's trailing twelve months EV/EBITDA ratio is 14.94 while the Zacks categorized Building Products - Heavy Construction industry trailing twelve months EV/EBITDA is pegged much lower at 6.08. This implies that the stock is overvalued and hence, we caution the investors against entering the stock at this point.
Stocks to Consider
Some better-ranked stocks in the construction sector include NCI Building Systems, Inc. , The Sherwin-Williams Company (SHW - Free Report) and Trex Company, Inc. (TREX - Free Report) . NCI Building Systems and Shrwin-Williams boast a Zacks Rank #1 (Strong Buy) while Trex carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NCI Building has an average positive earnings surprise of 11.28% in the trailing four quarters. Its estimates for fiscal 2017 and fiscal 2018 have gone up 3% and 5%, respectively in the past 30 days.
Sherwin-Williams has an average earnings surprise of 2.48% in the last four quarters. In the past 30 days, its estimates for fiscal 2017 and fiscal 2018 have moved up 4% and 15%, respectively.
Trex has delivered an average positive earnings surprise of 7.45% in the trailing four quarters. Its estimates for fiscal 2017 and fiscal 2018 have gone up 1% and 2%, respectively in the past 60 days.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500.
See today's Zacks "Strong Sells" absolutely free >>.