Core Viewpoint - Granite Construction Incorporated (GVA) has secured a $26-million contract for upgrades at San Francisco International Airport, which will enhance taxiway safety and functionality [1][2][3]. Group 1: Contract Details - The project involves upgrades to Taxiway Z and a section of Taxiway S, funded by SFO and included in GVA's second-quarter Committed and Awarded Projects (CAP) [1][2]. - The work will improve key taxiways used for aircraft movement, supporting ongoing airport operations [2][3]. - GVA's responsibilities include reconstructing asphalt concrete pavement, upgrading airfield lighting to LED, improving signage, enhancing electrical duct banks, and updating pavement markings and drainage [4]. Group 2: Project Timeline and Resources - Construction is scheduled to start in August 2025 and finish by November 2025 [5]. - GVA's Santa Clara hot plant will supply 24,105 tons of hot mix asphalt for the project [5]. Group 3: CAP Portfolio and Growth - GVA is focusing on expanding its high-quality CAP portfolio, which totaled $5.7 billion as of Q1 2025, reflecting a 7.5% sequential growth from $5.3 billion at the end of 2024 [6][7]. - The growth in CAP is attributed to increased public spending trends, providing favorable bidding opportunities despite macroeconomic challenges [7]. Group 4: Stock Performance and Market Outlook - GVA's shares have gained 39.7% over the past year, outperforming the Zacks Building Products - Heavy Construction industry's growth of 16.5% [9]. - The company anticipates strong opportunities across public and private markets to foster growth, despite market uncertainties and inflation concerns [9].

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying those that can fulfill their potential is challenging due to associated risks and volatility [1] Group 1: Company Overview - Granite Construction (GVA) is currently highlighted as a promising growth stock, supported by 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, significantly surpassing the industry average of 13.3% [5] - Granite Construction's year-over-year cash flow growth stands at 47.2%, well above the industry average of 13.4% [6] Group 2: Financial Metrics - The annualized cash flow growth rate for Granite Construction over the past 3-5 years is 29.1%, compared to the industry average of 8% [7] - The Zacks Consensus Estimate for the current year's earnings has increased by 8.2% over the past month, indicating a positive trend in earnings estimate revisions [8] Group 3: Investment Positioning - Granite Construction has achieved a Zacks Rank of 2 (Buy) and a Growth Score of A, positioning it favorably for potential outperformance in the growth stock category [10]

Group 1: Contract Announcement - Granite Construction Incorporated (GVA) has been awarded a $54 million CMGC contract by the Alaska Department of Transportation and Public Facilities for the first phase of a construction project [1] - Following the announcement, GVA's stock increased by 0.3% in after-hours trading [1] Group 2: Project Details - The first phase involves realigning the Parks Highway from milepost 319 to 322, which includes 2.5 million cubic yards of onsite earthwork, 25,000 tons of asphalt paving, and full traffic diversion [2] - The project will utilize GVA's equipment fleet, including a portable crusher and hot plant [2] - Construction is set to begin on May 1, 2025, and is expected to be completed by September 2027 [3] Group 3: Growth Strategy - Granite is focusing on expanding a high-quality CAP portfolio, driven by a favorable public funding environment and a resilient private market [4] - The company aims to pursue best-value projects to leverage established relationships and minimize risk [4] Group 4: Financial Performance - As of Q1 2025, Granite's CAP totaled $5.7 billion, reflecting a 7.5% sequential growth from $5.3 billion at the end of 2024 and a 3.6% year-over-year growth from $5.5 billion [5] - The growth is attributed to increased public spending trends, providing favorable bidding opportunities despite macroeconomic challenges [5] - GVA's shares have increased by 39.8% over the past year, outperforming the Zacks Building Products - Heavy Construction industry's growth of 19.5% [6] Group 5: Market Outlook - The company anticipates strong opportunities in both public and private markets, which are expected to support growth despite market uncertainties and inflation concerns [8]

Industry Overview - The Zacks Building Products - Heavy Construction industry is experiencing strong growth driven by favorable long-term trends, despite facing near-term challenges such as high interest rates and labor market pressures [1][8] - The industry includes mechanical and electrical construction, industrial and energy infrastructure, and building service providers, focusing on heavy civil construction projects like highways, bridges, and ports [3] Growth Drivers - A robust federal infrastructure agenda is unlocking significant investments in transportation, broadband, and energy networks, leading to increased demand in high-growth sectors [2] - The data center market's expansion is creating new opportunities for heavy construction companies, as demand for large-scale infrastructure solutions rises [5] - The ramp-up of 5G projects is benefiting industry players, with increased demand for wireline and wireless networks [6] Company Performance - EMCOR Group Inc. is benefiting from surging demand in data centers and healthcare, with a backlog of $11.8 billion reflecting strong long-term demand [32] - MasTec, with a backlog of $15.88 billion, has seen a 23.7% year-over-year increase, driven by growth across all segments [29] - Granite Construction has a record-high CAP of $5.7 billion, supported by federal and state infrastructure funding [21] Market Outlook - The industry's Zacks Industry Rank is 10, placing it in the top 4% of over 250 Zacks industries, indicating solid near-term prospects [10][11] - Aggregate earnings estimates for the industry have increased from $5.61 to $5.76 per share for 2025, reflecting growing analyst confidence [12] Recent Performance - The Zacks Building Products - Heavy Construction industry has outperformed the broader Zacks Construction sector and the S&P 500, gaining 12.3% over the past year compared to the sector's 7.9% decline [14] - The industry's current forward P/E ratio is 17.43, lower than the S&P 500's 20.43, suggesting potential value [17]

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].