Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying the right ones involves significant risk and volatility [1] Group 1: Company Overview - Granite Construction (GVA) is highlighted as a recommended growth stock with a favorable Growth Score and a top Zacks Rank [2] - The company has a historical EPS growth rate of 48.6%, with projected EPS growth of 23.2% this year, surpassing the industry average of 11.8% [5] Group 2: Financial Metrics - Year-over-year cash flow growth for Granite Construction stands at 47.2%, significantly higher than the industry average of 25.5% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 29.1%, compared to the industry average of 8% [7] Group 3: Earnings Estimates - There has been an upward revision in current-year earnings estimates for Granite Construction, with the Zacks Consensus Estimate increasing by 8.2% over the past month [9] - The combination of strong earnings growth, cash flow growth, and positive earnings estimate revisions has positioned Granite Construction as a Zacks Rank 1 stock with a Growth Score of A [10]

Financial Performance - Total revenue for the three months ended March 31, 2025, was $699.5 million, an increase of $27.3 million, or 4.1%, compared to $672.3 million in 2024[102] - Gross profit for the same period was $83.8 million, representing a 54.1% increase from $54.3 million in 2024, with a gross profit margin of 12.0%[111] - Construction revenue for the three months ended March 31, 2025, was $614.6 million, a 3.3% increase from $595.2 million in 2024, with public construction revenue decreasing to 64.4% of total construction revenue[104] - Materials revenue increased by $7.9 million, or 10.2%, to $84.9 million, driven by higher aggregates and asphalt volumes[105] - Construction gross profit increased by $28.6 million, or 50.3%, due to higher revenue and improved project execution[111] Project and Contract Information - Committed and Awarded Projects (CAP) balance was $5.7 billion as of March 31, 2025, an increase of $443.9 million, or 8.4%, from $5.3 billion at December 31, 2024[100] - Public sector projects accounted for approximately 80.6% of the total CAP, increasing from 77.8% at the end of 2024[108] - The company acquired Dickerson & Bowen, Inc. on August 9, 2024, contributing $10.1 million to construction revenue in Q1 2025[101] Expenses and Income - Selling, General and Administrative (SG&A) expenses for Q1 2025 totaled $115.9 million, an increase of $27.9 million (31.7%) compared to $87.99 million in Q1 2024, with SG&A as a percentage of revenue rising to 16.6% from 13.1%[112] - Other costs, net for Q1 2025 were $9.426 million, a decrease of $1.584 million (14.4%) from $11.01 million in Q1 2024, primarily related to ongoing civil litigation costs[113] - Total other income, net for Q1 2025 was $332,000, a decrease of $4.664 million compared to a net expense of $4.332 million in Q1 2024, driven by a $2.9 million decrease in equity income from affiliates[114] - The benefit from income taxes for Q1 2025 was $(11.756) million, compared to $(9.526) million in Q1 2024, with an effective tax rate of 29.3%, up from 24.4%[115] - The amount attributable to non-controlling interests increased to $(5.329) million in Q1 2025 from $(1.541) million in Q1 2024, reflecting new joint venture projects[116] Cash Flow and Capital Expenditures - Capital expenditures for Q1 2025 were $32.2 million, an increase of $4.3 million (15.4%) from $27.9 million in Q1 2024, with anticipated total capital expenditures for 2025 projected between $140 million and $160 million[125] - Cash provided by operating activities for Q1 2025 was $3.647 million, a decrease of $20.426 million (84.8%) from $24.073 million in Q1 2024, primarily due to a $33.3 million decrease in cash provided by working capital[126][128] - Cash used in investing activities for Q1 2025 was $(156.310) million, an increase of $145.548 million compared to $(10.762) million in Q1 2024, mainly due to $134.7 million in marketable securities purchases[129] - Cash used in financing activities for Q1 2025 was $(46.593) million, a decrease of $62.626 million compared to $(109.222) million in Q1 2024, primarily due to the repayment of a revolving credit facility balance[130] - As of March 31, 2025, total cash, cash equivalents, and marketable securities amounted to $513.077 million, down from $585.641 million as of December 31, 2024[122] Compliance and Share Repurchase - As of March 31, 2025, the company was in compliance with the financial covenants in the Credit Agreement, maintaining a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio[135] - The Board of Directors authorized a share repurchase program of up to $300.0 million, with $189.5 million remaining available as of March 31, 2025, after repurchasing 200 shares in the three months ended[136] - Future share repurchases will depend on market conditions, securities law limitations, and other factors[137] Market Risk - There has been no material change in the company's exposure to market risk, except for diversification of the investment portfolio as disclosed in the financial statements[139] Economic Factors - The federal Infrastructure Investment and Jobs Act has increased federal funding for infrastructure projects to its highest level in over 60 years, with $550 billion allocated over five years[97] - The company has implemented proactive measures to mitigate macro-economic factors, including fixed forward purchase contracts and energy surcharges[99]

Financial Data and Key Metrics Changes - In Q1 2025, revenue increased by $28 million or 4% year-over-year, while gross profit rose by $30 million or 54% [19] - Adjusted net income improved by $9 million, and adjusted EBITDA increased by $14 million [19] - Positive operating cash flow of $4 million was achieved in a typically weather-impacted quarter [19] Business Line Data and Key Metrics Changes - In the Construction segment, revenue increased by $19 million or 3% year-over-year to $615 million, driven by strong capital across the company [20] - Construction segment gross profit improved by $29 million to $85 million, with a gross profit margin of 14% [20] - In the Materials segment, revenue increased by $8 million year-over-year to $85 million, with gross loss decreasing by $1 million to a loss of $2 million [23] Market Data and Key Metrics Changes - The capital (CAP) increased by $444 million to a record $5.7 billion in Q1 2025, reflecting a strong bidding environment [16] - Strong performance was noted across all markets, particularly in California, Texas, and the Federal Division [17] Company Strategy and Development Direction - The company is strategically investing in its materials business to strengthen its footprint and drive higher margins [12] - The focus remains on pursuing accretive M&A opportunities to strengthen home markets and expand geographic footprint, targeting two to three deals in 2025 [12][25] - The company aims to mitigate risks associated with inflation and tariffs by locking in pricing at bid time and monitoring commodity markets [11] Management's Comments on Operating Environment and Future Outlook - Management confirmed guidance for 2025 and 2027 financial targets, indicating confidence in market performance despite macroeconomic uncertainties [6][7] - The federal infrastructure bill continues to provide opportunities, with expectations for strong spending levels in the coming years [33] - Management expressed optimism about the construction season ahead, expecting year-over-year revenue growth to increase in the second and third quarters [21] Other Important Information - The company has invested significantly in its materials business, increasing reserves by 56% to 1.6 billion tons and adding new aggregate and asphalt plants [14] - Cash and marketable securities were $513 million at the end of Q1, with debt largely unchanged at $740 million [24] Q&A Session Summary Question: Can you discuss the active bidding environment and trajectory of CAP? - Management noted a strong public market, with CAP reflecting increased bidding and higher margins than previous years [31][32] Question: What is driving higher profitability in the Construction segment despite weather challenges? - The increase in gross profit margin is attributed to improved execution and a focus on higher quality projects [36] Question: How do the movements in bid build and best value projects affect CAP quality? - Management indicated that while bid build projects grew, best value projects are larger and more complex, affecting the timing of their inclusion in CAP [42] Question: What is the expected percentage of materials revenue relative to construction sales for 2025? - Management expects materials revenue to stabilize around 17% to 18% of construction sales for 2025, reflecting ongoing investments [46] Question: How is the federal business performing, particularly in Guam and the Southeast region? - The federal business is strong, with successful projects in Guam and Texas, and the Southeast region is performing well post-acquisition [57][60] Question: Can you comment on cash gross profit margins and demand cadence? - Management expects cash gross profit margins to improve and noted strong demand in April following a weather-impacted March [72][75]

Financial Performance & Targets - Q1 2025 total revenue reached $700 million, a $28 million or 4% increase year-over-year[15, 19] - Adjusted EBITDA for Q1 2025 was $28 million, up $14 million from the previous year, with an adjusted EBITDA margin of 4%, a 190 bps increase year-over-year[15, 19] - The company is reiterating its 2025 guidance and 2027 financial targets[7] - The company targets 9% operating cash flow as a percentage of revenue in 2025[3, 22] - The company is aiming for a 1% year-over-year growth in construction gross profit margin in 2025[3] Construction Segment - The Committed and Awarded Projects (CAP) reached a new record of $57 billion[13, 14] - Construction revenue for Q1 2025 was $615 million, a $19 million increase year-over-year[15] Materials Segment - Materials revenue for Q1 2025 was $85 million, an $8 million increase year-over-year[15] - Aggregate sales volume increased by 17% year-over-year, while asphalt sales volume increased by 34% year-over-year[19, 74] - The company expects high-single digit price increases for aggregates and low-single digit increases for asphalt in 2025[11] Strategic Initiatives - The company is focused on materials-led M&A, reserve expansion, plant automation, and facility upgrades[3, 11] - Memphis Stone & Gravel has rights to an estimated 82 million tons of reserves, and Dickerson & Bowen has rights to an estimated 19 million tons of reserves[3]

Financial Data and Key Metrics Changes - In Q1 2025, revenue increased by $28 million or 4% year-over-year, while gross profit rose by $30 million or 54% [18] - Adjusted net income improved by $9 million, and adjusted EBITDA increased by $14 million, achieving positive operating cash flow of $4 million [18][22] - The Construction segment's revenue increased by $19 million or 3% year-over-year to $615 million, with gross profit improving by $29 million to $85 million, resulting in a gross profit margin of 14% [19][20] Business Line Data and Key Metrics Changes - The Materials segment's revenue increased by $8 million year-over-year to $85 million, with gross loss decreasing by $1 million to a loss of $2 million [22] - The Construction segment is expected to see year-over-year revenue growth increase in the second and third quarters due to a busy construction season ahead [20] - The average selling prices for aggregates are expected to increase in the high single digits, while asphalt prices are projected to rise in the low single digits [14] Market Data and Key Metrics Changes - The company reported a record CAP of $5.7 billion, an increase of $444 million in Q1 [15] - Strong bidding environments in public markets, supported by federal funding and healthy state budgets, are expected to continue driving opportunities [32] - The federal business has seen significant work, particularly in Guam and Texas, indicating strong market demand [54][55] Company Strategy and Development Direction - The company is focused on strategically investing in its materials business to drive volumes and higher margins, with a target of completing two to three M&A deals in 2025 [11][12] - The company aims to derisk its project portfolio by avoiding long-term design-build mega projects and focusing on locking in pricing at bid time [10] - Continued emphasis on operational excellence and a high-quality project portfolio is expected to support growth and margin expectations [16][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting 2025 guidance and 2027 financial targets despite macroeconomic uncertainties [5][6] - The company has not experienced significant impacts from tariffs to date, although it continues to monitor the situation closely [25][7] - The outlook for 2025 remains positive, with expectations for strong demand in both public and private sectors [26][32] Other Important Information - The company has invested significantly in its materials business, increasing reserves by 56% to 1.6 billion tons and adding new aggregate and asphalt plants [13] - The first quarter typically sees slower cash flow, but the company generated $4 million in operating cash flow, slightly better than expected [23] - The company maintains a strong balance sheet with cash and marketable securities of $513 million and debt largely unchanged at $740 million [23] Q&A Session Summary Question: Active bidding environment and trajectory of CAP - Management noted a strong public market environment, with CAP reflecting increased bidding and higher margins than previous years [30][31] Question: Higher profitability in the Construction segment despite weather challenges - Management attributed higher profitability to improved execution and a focus on higher quality projects, expecting continued margin improvement throughout 2025 [34][35] Question: Diverging movements in project types and CAP quality - Management indicated that while bid-build projects grew, best value projects are larger and more complex, maintaining a healthy mix in the project portfolio [40][41] Question: Federal business and regional performance post-acquisition - Management highlighted strong performance in the federal business and successful integration of acquisitions in the Southeast, with confidence in future growth [55][56] Question: Cash gross profit per ton compared to peers - Management acknowledged differences in cash gross profit per ton due to geographic factors and product mix, with expectations for margin expansion in 2025 [66][69] Question: Demand cadence and April performance - Management reported strong demand in January and February, with April showing continued strength despite some weather-related slowdowns in March [72][75] Question: Tariff impacts on equipment costs - Management anticipates some increases in equipment and parts costs due to tariffs but has been proactive in managing capital expenditures [76][77]

Financial Performance - Net loss attributable to Granite Construction for Q1 2025 was $34 million, or $(0.77) per diluted share, compared to a net loss of $31 million, or $(0.70) per diluted share in Q1 2024[3]. - Revenue for Q1 2025 increased by 4% year-over-year to $700 million, with the Construction segment growing by 3% and the Materials segment by 10%[6][7]. - Adjusted EBITDA for Q1 2025 totaled $28 million, up from $14 million in the same period last year[7]. - Gross profit for Q1 2025 increased by $30 million to $84 million, with a gross profit margin of 12%[7]. - Net loss attributable to Granite Construction Incorporated was $33.7 million, compared to a net loss of $31.0 million in the prior year[22]. - Adjusted EBITDA for the three months ended March 31, 2025, was $28.1 million, significantly higher than $14.1 million in 2024, reflecting an adjusted EBITDA margin of 4.0%[30]. - The net loss margin for the three months ended March 31, 2025, was (4.8)%, slightly worse than (4.6)% in 2024[30]. - Total revenue for the three months ended March 31, 2025, was $84,929 million, a 10.5% increase from $77,062 million in the same period of 2024[37]. - Gross profit for the three months ended March 31, 2025, was $(1,589) million, compared to a gross loss of $(2,543) million in the same period of 2024, indicating an improvement[37]. - For the year ended December 31, 2024, total revenue was $592,349 million, a 14.6% increase from $516,884 million in 2023[39]. - Gross profit for the year ended December 31, 2024, was $81,695 million, with a gross profit margin of 13.8%[39]. Expenses and Costs - Selling, general, and administrative (SG&A) expenses rose to $116 million, or 16.6% of revenue, primarily due to an increase in stock-based compensation[7]. - The company incurred stock-based compensation expenses of $32.2 million, compared to $12.9 million in the previous year[30]. - Depreciation, depletion, and amortization for the year ended December 31, 2024, totaled $45,091 million, compared to $26,766 million in 2023[39]. Cash Flow and Capital Management - The company reported a net cash provided by operating activities of $3.6 million, a decrease from $24.1 million in the same quarter of 2024[24]. - Total cash and cash equivalents at the end of the period were $379.1 million, down from $321.8 million year-over-year[24]. - The company repurchased $15.2 million of common stock during the quarter, compared to $7.4 million in the same period last year[24]. Project and Revenue Outlook - Committed and Awarded Projects (CAP) increased by $444 million sequentially to $5.7 billion, reflecting substantial opportunities in both public and private markets[6][9]. - Granite's guidance for 2025 remains unchanged, with expected revenue in the range of $4.2 billion to $4.4 billion and an adjusted EBITDA margin of 11.0% to 12.0%[12][17]. - The company anticipates mid-20s effective tax rate for adjusted net income and capital expenditures of approximately $140 million to $160 million for 2025[17]. - Granite is focused on vertical integration strategies to enhance aggregate margins and expects additional growth in the coming years[4][11]. Segment Performance - The Materials segment reported revenue of $84.9 million, a 10.2% increase year-over-year, driven by higher aggregates and asphalt volumes[10][11]. - Intersegment revenues for the three months ended March 31, 2025, were $20.7 million, up from $11.6 million in the same period of 2024[38]. - The Asphalt product line reported external revenue of $395,798 million for the year ended December 31, 2024, an increase from $339,608 million in 2023[39]. - Average selling price per ton for the Aggregate product line was $16.08 in 2024, compared to $14.87 in 2023, reflecting a 8.1% increase[39]. - Cash gross profit for the three months ended March 31, 2025, was $10,477 million, representing 12.3% of revenue, up from 10.2% in the same period of 2024[37]. - The company reported a cash gross profit of $126,786 million for the year ended December 31, 2024, which is 21.4% of total revenue[39].

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Sterling Infrastructure (STRL) and Granite Construction (GVA) are prominent mid-cap construction companies in the United States specializing in large-scale infrastructure, transportation and water-related projects. Both firms have seen tailwinds from rising federal and state infrastructure investments, especially with the momentum generated by the Infrastructure Investment and Jobs Act (IIJA).As the United States focuses on upgrading aging transportation systems and advancing sustainable infrastructure, the ...

Core Viewpoint - Granite Construction Incorporated (GVA) has secured a $66 million contract from the California Department of Transportation for improvements to the Caldwell Avenue interchange on SR99, which is expected to enhance regional infrastructure and traffic flow [1][4][5]. Project Details - The project includes the construction of two new precast girder bridges, 12 retaining walls, and four new on- and off-ramps controlled by roundabouts [2][3]. - Approximately 216,000 cubic yards of import borrow will be required for roadway expansion, along with upgrades to the drainage system, new pavement markings, roadside signage, and replacement of highway electrical systems [3]. Strategic Growth and Regional Impact - The project is expected to benefit both the traveling public and regional development, aligning with another pavement rehabilitation project in nearby Tulare scheduled for 2025 [4]. - This contract reinforces Granite's leadership in transportation infrastructure and positions the company for continued growth, supported by federal and state funding [5]. CAP and Market Conditions - Granite is focusing on expanding its high-quality committed and awarded projects (CAP) portfolio, which totaled $5.3 billion in 2024, despite a sequential decline of $324 million and a year-over-year decrease of $250 million [6][7]. - Bidding activity remains strong, with expectations for significant project awards in the first half of 2025, indicating potential growth opportunities [7]. Stock Performance - GVA's shares have declined by 15.6% year to date, slightly better than the 16.4% decline in the Zacks Building Products - Heavy Construction industry, with the company optimistic about growth opportunities in public and private markets [9].

Revenue Sources - Approximately 75% of the Construction Segment revenue in 2024 was derived from contracts funded by government agencies[56] - Approximately 75% of the company's construction revenue for the year ended December 31, 2024, was funded by federal, state, and local government agencies[93] - A significant portion of the company's revenue is derived from project-based work, making cash flows and financial results unpredictable due to the timing of new contracts and terminations[14] Contractual Risks - The percentage of fixed unit price contracts in unearned revenue was 59.1% and 63.5% at December 31, 2024 and 2023, respectively[60] - The percentage of fixed price contracts in unearned revenue was 33.2% and 30.5% at December 31, 2024 and 2023, respectively[61] - Fixed price contracts expose the company to risks of increased project costs due to inflation and inefficiencies, potentially impacting profitability[93] - The company faces risks related to the modification, delay, or termination of U.S. federal government contracts, which could materially affect its financial condition and results of operations[14] - The company may experience revenue declines if anticipated project volumes are not assigned or if contracts are canceled, as many contracts are open to competitive bidding[97] Financial Position and Performance - The company faces risks from unfavorable economic conditions, including inflation and high interest rates, which could adversely affect its financial position and results of operations[93] - Economic factors, including inflation and rising interest rates, could adversely affect the company's financial position and results of operations[100] - The company may incur significant out-of-pocket expenditures if it acquires liabilities that are not adequately covered by insurance or indemnity agreements[106] - The company is required to make contributions to certain multi-employer pension plans, which could lead to material cash contributions in the future[112] - The company has significant debt obligations, including $373.75 million in 3.75% Convertible Notes due in 2028 and $373.75 million in 3.25% Convertible Notes due thereafter[235] Operational Risks - The company’s operations are significantly affected by weather conditions, particularly in the first and fourth quarters, which can lead to variability in revenues and profitability[79] - Weather conditions significantly affect the company's ability to perform work, leading to variability in quarterly revenues and profitability[100] - Public health events, such as pandemics, could disrupt the company's operations and negatively impact its financial condition[100] - Strikes or work stoppages could significantly impact the company's operations and results in the future[108] Compliance and Regulatory Risks - The company is subject to various government regulations, including environmental, health and safety, and anti-corruption laws, which may impose additional costs on operations[58] - Noncompliance with environmental regulations could result in substantial penalties or termination of government contracts[114] - The company is subject to strict regulatory requirements for government contracts, which could lead to suspension or debarment from contracting[112] - The company may be exposed to liabilities under the Foreign Corrupt Practices Act (FCPA), which could adversely affect its financial position[115] Joint Ventures and Partnerships - The company participates in joint ventures for large, complex projects, sharing expertise and resources with partners[68] - The company faces risks related to joint ventures, including potential liabilities if partners fail to perform under contracts[110] Equipment and Asset Management - The company purchased $59.2 million and $71.9 million of construction equipment and vehicles in 2024 and 2023, respectively[78] - As of December 31, 2024, the company owned 2,645 heavy construction equipment and 4,725 trucks and vehicles, an increase from 2,457 and 4,686 in 2023[78] - The company continually monitors and adjusts its fleet size to align with existing and expected future work[78] - The company’s equipment count includes 189 pieces of heavy construction equipment and 206 vehicles from the D&B acquisition[78] Financial Management and Investments - The company has a cash and cash equivalents balance of $585.6 million with a weighted average interest rate of 4.34% as of December 31, 2024[235] - The fair value of the 3.75% Convertible Notes was approximately $738.7 million as of December 31, 2024, up from $475.6 million in 2023[235] - The company maintains an investment portfolio targeted to an average maturity of no more than one year from the date of purchase[230] - The company’s investment policy limits credit exposure to any one issue, issuer, or type of instrument[230] Market and Competitive Environment - The company has a competitive marketplace with multiple competitors, which may lead to decreased profit margins and new awards[93] - The company's stock price has historically been volatile, influenced by market factors and operational results[125] - Delaware law and the company's charter may impede takeovers, potentially reducing increases in the market price of common stock[125] Risk Management and Mitigation - The company maintains insurance coverage consistent with industry practice, including general and excess liability, property, and workers' compensation[75] - The company has a co-surety structure involving three sureties to mitigate risks associated with obtaining surety bonds[76] - The company has implemented proactive measures to mitigate the impact of inflation and supply chain constraints, including fixed forward purchase contracts and energy surcharges[77] - The company faces physical, transition, and regulatory risks related to climate change that could materially impact its business and financial condition[128] - The company is committed to advancing its sustainability strategy, but achieving its commitments is subject to various risks and uncertainties[128] Internal Controls and Governance - The company identified material weaknesses in internal control over financial reporting in previous years, which have now been remediated[116] - Future identification of material weaknesses could lead to inaccurate financial reporting and loss of investor confidence, potentially decreasing the market price of common stock[116] - The company may incur significant expenses related to litigation or regulatory investigations due to past financial statement restatements[118] - Cybersecurity incidents, including ransomware and unauthorized access, could result in business interruptions and remediation costs, adversely affecting financial position[120] - The company has developed pilot programs for generative artificial intelligence tools, including a knowledge retention tool and a risk detection tool, which may present risks if misused[120] Debt and Financing - The company may borrow on the Revolver at a margin ranging from 1.0% to 2.0% based on its Consolidated Leverage Ratio, with nothing drawn on the Revolver as of December 31, 2024[234] - The company’s 3.25% and 3.75% Convertible Notes may dilute existing stockholders' ownership interests upon conversion[123] - The capped call transactions related to the Convertible Notes may affect the value of common stock and could lead to dilution if market prices exceed cap prices[124]