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GLDD Banks on Favorable Market Trends Amid High Costs & Expenses
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Great Lakes Dredge & Dock Corporation (GLDD - Free Report) is benefiting from its focus on the new build program and the ongoing demand strength for dredging services. The consistent award wins reflect the favorable market trends and the strategic initiatives undertaken by the company.
Other industry players that share space with GLDD, including EMCOR Group, Inc. (EME - Free Report) , Granite Construction Incorporated (GVA - Free Report) and MasTec, Inc. (MTZ - Free Report) , are also benefiting from the favorable market trends and solid demand for public construction projects. Increased government funding and optimism about the rate cuts by the Fed are fostering the growth trend.
However, Great Lakes’ prospects are somewhat hindered by the increased cost and expense structure and fluctuations in commodity prices.
What Makes the Stock Attractive?
Strategic New Build Program: Great Lakes’ focus on its new build program has been benefiting it in enhancing its project performance. One of the key aspects of this initiative is modernizing its fleet, enabling it to thrive in this competitive market.
The company moved forward with this program with the recent delivery of its newest 6,500-cubic-yard-capacity hopper dredge, the Galveston Island. This new addition to its fleet benefited the top line in the recent quarter and is expected to solidify the prospects going forward. Another new addition, the Amelia Island, is currently under construction and is expected to be delivered in the latter half of 2025. These specially designed dredge additions enable the company to operate on projects that redevelop and improve the beaches and shorelines, which are subject to continual damage due to storms and rising sea levels.
Robust Bid Market: The company has been notably benefiting from a strong bid market since the beginning of 2024, primarily driven by the record 2024 U.S. Army Corps of Engineers' budget of $8.7 billion. It expects this market condition to continue for the latter half of 2024 as well, especially in the prime markets for capital port deepening and coastal protection projects.
The favorable bid market is reflected in the strong dredging backlog of GLDD at the end of the first six months of 2024. During the said time frame, the dredging backlog was $807.9 million, with 85% in capital projects. Furthermore, the company had $273.1 million in low bids and options pending award.
Consistent Contract Wins: Great Lakes’ strong domestic dredging operations, high equipment utilization and solid project execution have positioned it well with encouraging award flows. Recently, the company announced receiving $342.3 million worth of several dredging awards, further enhancing its backlog and revenue visibility in the upcoming years. The largest project, in terms of value, among the six awards was the Sabine-Neches project in Texas with a total award value of $219.1 million.
GLDD received another set of dredging awards totaling $256.2 million in August 2024. Among these six awards, the Mobile Harbor, Alabama Deepening and Widening project in Alabama was the largest in terms of value, with $65.9 million in total valuation.
Factors Hindering Growth
High Costs & Expenses: Given the ongoing market uncertainties, Great Lakes has been facing an inflated cost and expense structure for some time now. The hike is primarily due to higher stock compensation and employee benefit expenses.
During the first six months of 2024, general and administrative expenses increased to $32.3 million from $27.5 million in the year-ago period. The company’s ongoing investments in strategic initiatives, along with the uncertain market scenario, are marring its bottom line’s prospects.
Commodity Price Risk: The company is exposed to various market risks, especially commodity price fluctuations. Given the nature of its business, the risks are related to diesel fuel purchase requirements, which occur in the normal course of business. Fluctuations in diesel fuel prices could harm cash flows associated with its domestic dredging contracts.
A Brief Review of Other Players
EMCOR: The company is benefiting from a continued strong mix and pipeline of projects in large and growing market sectors with long-term secular trends, including high-tech and traditional manufacturing, network and communications, institutional and healthcare. Furthermore, a strong demand for its specialty contracting services indicates a positive business trajectory. During second-quarter 2024, RPOs approached record levels of $9 billion and the pipeline remained robust.
Granite: While undertaking projects, the company primarily concentrates on its home markets and remains focused on best-value projects. This strategy allows it to deliver large projects efficiently while mitigating associated risks. It abides by the collaborative delivery methods utilized in best-value projects as such methods allow it to identify and mitigate risks in the early phases of the projects. At the end of the second quarter of 2024, best-value projects represented 42% or $2.3 billion of Granite’s total Committed and Awarded Projects. The quarter-end value indicated an increase of $98 million year over year
MasTec: The company is benefiting from solid contributions from its Oil and Gas segment, backed by higher levels of project activity. Also, a strong backlog and focus on strategic investments position it well for increased infrastructure demands globally. The robust demand for its services suggests the potential for double-digit revenue and earnings growth in 2025 and beyond. At the end of June 2024, it had an 18-month backlog of $13.3 billion, up 3.9% sequentially.
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GLDD Banks on Favorable Market Trends Amid High Costs & Expenses
Great Lakes Dredge & Dock Corporation (GLDD - Free Report) is benefiting from its focus on the new build program and the ongoing demand strength for dredging services. The consistent award wins reflect the favorable market trends and the strategic initiatives undertaken by the company.
Other industry players that share space with GLDD, including EMCOR Group, Inc. (EME - Free Report) , Granite Construction Incorporated (GVA - Free Report) and MasTec, Inc. (MTZ - Free Report) , are also benefiting from the favorable market trends and solid demand for public construction projects. Increased government funding and optimism about the rate cuts by the Fed are fostering the growth trend.
However, Great Lakes’ prospects are somewhat hindered by the increased cost and expense structure and fluctuations in commodity prices.
What Makes the Stock Attractive?
Strategic New Build Program: Great Lakes’ focus on its new build program has been benefiting it in enhancing its project performance. One of the key aspects of this initiative is modernizing its fleet, enabling it to thrive in this competitive market.
The company moved forward with this program with the recent delivery of its newest 6,500-cubic-yard-capacity hopper dredge, the Galveston Island. This new addition to its fleet benefited the top line in the recent quarter and is expected to solidify the prospects going forward. Another new addition, the Amelia Island, is currently under construction and is expected to be delivered in the latter half of 2025. These specially designed dredge additions enable the company to operate on projects that redevelop and improve the beaches and shorelines, which are subject to continual damage due to storms and rising sea levels.
Robust Bid Market: The company has been notably benefiting from a strong bid market since the beginning of 2024, primarily driven by the record 2024 U.S. Army Corps of Engineers' budget of $8.7 billion. It expects this market condition to continue for the latter half of 2024 as well, especially in the prime markets for capital port deepening and coastal protection projects.
The favorable bid market is reflected in the strong dredging backlog of GLDD at the end of the first six months of 2024. During the said time frame, the dredging backlog was $807.9 million, with 85% in capital projects. Furthermore, the company had $273.1 million in low bids and options pending award.
Consistent Contract Wins: Great Lakes’ strong domestic dredging operations, high equipment utilization and solid project execution have positioned it well with encouraging award flows. Recently, the company announced receiving $342.3 million worth of several dredging awards, further enhancing its backlog and revenue visibility in the upcoming years. The largest project, in terms of value, among the six awards was the Sabine-Neches project in Texas with a total award value of $219.1 million.
GLDD received another set of dredging awards totaling $256.2 million in August 2024. Among these six awards, the Mobile Harbor, Alabama Deepening and Widening project in Alabama was the largest in terms of value, with $65.9 million in total valuation.
Factors Hindering Growth
High Costs & Expenses: Given the ongoing market uncertainties, Great Lakes has been facing an inflated cost and expense structure for some time now. The hike is primarily due to higher stock compensation and employee benefit expenses.
During the first six months of 2024, general and administrative expenses increased to $32.3 million from $27.5 million in the year-ago period. The company’s ongoing investments in strategic initiatives, along with the uncertain market scenario, are marring its bottom line’s prospects.
Commodity Price Risk: The company is exposed to various market risks, especially commodity price fluctuations. Given the nature of its business, the risks are related to diesel fuel purchase requirements, which occur in the normal course of business. Fluctuations in diesel fuel prices could harm cash flows associated with its domestic dredging contracts.
A Brief Review of Other Players
EMCOR: The company is benefiting from a continued strong mix and pipeline of projects in large and growing market sectors with long-term secular trends, including high-tech and traditional manufacturing, network and communications, institutional and healthcare. Furthermore, a strong demand for its specialty contracting services indicates a positive business trajectory. During second-quarter 2024, RPOs approached record levels of $9 billion and the pipeline remained robust.
Granite: While undertaking projects, the company primarily concentrates on its home markets and remains focused on best-value projects. This strategy allows it to deliver large projects efficiently while mitigating associated risks. It abides by the collaborative delivery methods utilized in best-value projects as such methods allow it to identify and mitigate risks in the early phases of the projects. At the end of the second quarter of 2024, best-value projects represented 42% or $2.3 billion of Granite’s total Committed and Awarded Projects. The quarter-end value indicated an increase of $98 million year over year
MasTec: The company is benefiting from solid contributions from its Oil and Gas segment, backed by higher levels of project activity. Also, a strong backlog and focus on strategic investments position it well for increased infrastructure demands globally. The robust demand for its services suggests the potential for double-digit revenue and earnings growth in 2025 and beyond. At the end of June 2024, it had an 18-month backlog of $13.3 billion, up 3.9% sequentially.