Granite Construction Inc. (GVA) , the fourth-largest publicly traded heavy-construction company in the US, saw shares way off on Monday as the company opened the week with the release of its earnings statement for the recently-ended third-quarter.
It’s not hard to see why; net income for Q3 came in at $11 million, or $0.28 per share on a diluted basis on revenue of $741 million, compared to the prior year-period during which the company earned $37.1 million, or $0.94 per diluted share on revenue of $728.48 million. The sequentially lower figures also missed the average of EPS estimates of $0.78 on revenue of $900.8 million by a long shot.
Company President and CEO James H. Roberts tried to explain the gaping miss by highlighting a number of contingencies: “Large project results reflect fewer projects in the mature, profit-generating stage than last year. In addition, this quarter and throughout 2013, we have dealt with the ongoing negative impact from a large highway project in the state of Washington. The project is about 80 percent complete, and is expected to finish in mid-2014. The talented, senior team in place is committed to completing the project expeditiously and efficiently for the owner. We are pursuing our rights for a significant cost recovery on this project.”
Roberts also pointed to an industry-wide trend of large order backlogs as a promising indicator for 2014. Indeed, Granite’s contract backlog for the recently ended period was at some $2.8 billion, over $1 billion higher than in the year-ago period. And revenues from large project construction were at $189 million, down from the year-ago’s $256 million. Still, the large project segment reported a loss of $2.5 million during the third quarter of this year.
Roberts was also clear about the company’s guidance for the rest of the year, and into 2014, saying “Construction segment revenues are expected to total $1.2 billion to $1.3 billion, with a corresponding gross profit margin of 8.5 percent to 9.5 percent. Large Project Construction segment revenues are expected to be in the range of $750 million to $800 million, with a corresponding gross profit margin of 8.5 percent to 9.5 percent. Construction Materials revenues are expected to be $220 million to $230 million, with a corresponding gross profit margin of 2 percent to 3 percent. Selling, general and administrative expenses are expected to be $205 million to $210 million for the year.”
Shares for Granite are down over 2 percent on the year, with the reaction to Monday’s earnings report taking the company almost 6 percent lower to $30.54 per share.
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