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Why You Should Buy Great Lakes (GLDD) Amid Coronavirus Scare
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Great Lakes Dredge & Dock Corporation (GLDD - Free Report) has been strengthening market position on the back of solid backlog, cost-reduction program, and domestic capital dredging and rivers & lakes businesses. Shares of the company have outperformed the Zacks Building Products - Heavy Construction industry in the year-to-date period.
Earnings estimates for 2020 have increased 23.3% over the past 60 days to $1.06 per share. This indicates a year-over-year growth rate of 23.3%. Notably, its earnings surpassed analysts’ expectations in each of the trailing 10 quarters.
Great Lakes is the largest provider of dredging services in the United States. Also, it provides various dredging services internationally. The U.S. Army Corps of Engineers (the “Corps”) is one of the largest domestic dredging customers of Great Lakes. In first-quarter 2020, the company received contracts from federal government agencies, including the Corps, U.S. Coast Guard and U.S. Navy, which contributed nearly 76% to total dredging revenues.
Despite uncertain market conditions owing to the COVID-19 pandemic, Great Lake’s project work is largely uninterrupted as the federal government has designated it as a “Critical Infrastructure” company.
In first-quarter 2020, its earnings and revenues grew 62.5% and 13%, respectively, driven by strong project performance. It witnessed improved productivity on the Hunting Island, and Delray & Ocean Ridge beach re-nourishment projects. It also worked on the Delaware River Reach B deepening project and completed Phase 1 of the deepening of the Corpus Christi entrance channel.
The company had total backlog of $474.9 million in the first quarter. It is well positioned for the rest of 2020 as the Corps is continuing to tender bids and prioritize all types of dredging including port maintenance and expansion, along with coastal protection projects.
Recently, it booked a contract for the construction of a 6,500-cubic-yard-capacity trailing suction hopper dredge, which will boost the capabilities of the company’s hopper fleet in coastal protection and maintenance markets. It will also address specific needs in the growing offshore wind market.
The company — which shares space with EMCOR Group, Inc. (EME - Free Report) , MasTec, Inc. (MTZ - Free Report) and North American Construction Group Ltd. (NOA - Free Report) in the same industry — remains focused on lowering costs, which will have a positive impact on the bottom line. It is targeting to reduce costs by closing non-performing assets and businesses. These cost-saving measures are expected to improve its gross and operating margins significantly in the upcoming quarters.
During the first quarter, gross margins improved 560 basis points, driven by strong performance of maintenance dredging and coastal protection businesses, along with lower plant expense and busier dredges work. Adjusted EBITDA also increased 40% from a year ago.
Meanwhile, the company expects 2020 bid market to be similar to 2019, as it continues to upgrade the existing U.S. domestic fleet with new equipment and technology to increase productivity.
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Why You Should Buy Great Lakes (GLDD) Amid Coronavirus Scare
Great Lakes Dredge & Dock Corporation (GLDD - Free Report) has been strengthening market position on the back of solid backlog, cost-reduction program, and domestic capital dredging and rivers & lakes businesses. Shares of the company have outperformed the Zacks Building Products - Heavy Construction industry in the year-to-date period.
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Earnings estimates for 2020 have increased 23.3% over the past 60 days to $1.06 per share. This indicates a year-over-year growth rate of 23.3%. Notably, its earnings surpassed analysts’ expectations in each of the trailing 10 quarters.
The company’s Zacks Rank #1 (Strong Buy) and impressive VGM Score of A is also encouraging. You can see the complete list of today’s Zacks #1 Rank stocks here.
What’s Driving the Stock?
Great Lakes is the largest provider of dredging services in the United States. Also, it provides various dredging services internationally. The U.S. Army Corps of Engineers (the “Corps”) is one of the largest domestic dredging customers of Great Lakes. In first-quarter 2020, the company received contracts from federal government agencies, including the Corps, U.S. Coast Guard and U.S. Navy, which contributed nearly 76% to total dredging revenues.
Despite uncertain market conditions owing to the COVID-19 pandemic, Great Lake’s project work is largely uninterrupted as the federal government has designated it as a “Critical Infrastructure” company.
In first-quarter 2020, its earnings and revenues grew 62.5% and 13%, respectively, driven by strong project performance. It witnessed improved productivity on the Hunting Island, and Delray & Ocean Ridge beach re-nourishment projects. It also worked on the Delaware River Reach B deepening project and completed Phase 1 of the deepening of the Corpus Christi entrance channel.
The company had total backlog of $474.9 million in the first quarter. It is well positioned for the rest of 2020 as the Corps is continuing to tender bids and prioritize all types of dredging including port maintenance and expansion, along with coastal protection projects.
Recently, it booked a contract for the construction of a 6,500-cubic-yard-capacity trailing suction hopper dredge, which will boost the capabilities of the company’s hopper fleet in coastal protection and maintenance markets. It will also address specific needs in the growing offshore wind market.
The company — which shares space with EMCOR Group, Inc. (EME - Free Report) , MasTec, Inc. (MTZ - Free Report) and North American Construction Group Ltd. (NOA - Free Report) in the same industry — remains focused on lowering costs, which will have a positive impact on the bottom line. It is targeting to reduce costs by closing non-performing assets and businesses. These cost-saving measures are expected to improve its gross and operating margins significantly in the upcoming quarters.
During the first quarter, gross margins improved 560 basis points, driven by strong performance of maintenance dredging and coastal protection businesses, along with lower plant expense and busier dredges work. Adjusted EBITDA also increased 40% from a year ago.
Meanwhile, the company expects 2020 bid market to be similar to 2019, as it continues to upgrade the existing U.S. domestic fleet with new equipment and technology to increase productivity.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>