Group 1 - The company Granite Construction Incorporated (NYSE: GVA) is recognized as a provider of infrastructure solutions and has been viewed positively for several years [1] - The focus of Crude Value Insights is on cash flow and companies that generate it, highlighting the potential for value and growth in the oil and natural gas sector [1] Group 2 - Subscribers to Crude Value Insights benefit from a 50+ stock model account and in-depth cash flow analyses of exploration and production (E&P) firms [2] - The service includes live chat discussions about the oil and gas sector, enhancing community engagement and information sharing [2]

Project Details - Granite Construction Incorporated (GVA) has been awarded an $88 million project by the California Department of Transportation (Caltrans) to improve a portion of Ortega Highway State Route 74 (SR 74) [1] - The project will be funded by state and federal sources, with construction expected to begin in April 2025 and be completed by November 2026 [1] - GVA will include this project in its first quarter of 2025 Committed and Awarded Projects (CAP) [1] Work Scope - The project involves widening shoulders and roadways, installing centerline and edge line rumble strips, and resurfacing the highway to improve safety and efficiency [2] - These enhancements will provide vehicle buffer room, significantly improving safety on the narrow two-lane mountainous highway [2] Strategic Importance - The contract builds on Granite's ongoing efforts on this stretch of highway over the past few years, aligning with its strategic goal of expanding its footprint in the Inland Empire of Southern California [3] - Granite is focusing on growing a high-quality CAP portfolio, leveraging positive public funding and a resilient private market to deliver larger projects while minimizing risk [3] CAP Growth - During the third quarter of 2024, Granite added $44 million to its CAP, bringing the total to $5.6 billion, a $44 million sequential increase and a $35 million year-over-year increase [4] - Best-value projects represented 42% ($2.4 billion) of the company's CAP at the end of the quarter, an increase of $31 million from the year-ago quarter [4] Best-Value Projects - Best-value projects include construction manager, general contractor, and progressive design builds, which Granite believes are more efficiently constructed and have a solid growth trajectory [5] Stock Performance - GVA's shares have gained 39.9% in the past six months, slightly below the Zacks Building Products - Heavy Construction industry's 41.8% growth [7] - The company believes strong opportunities across public and private markets will likely foster growth in the upcoming period [8] Industry Comparison - Weyerhaeuser Company (WY) has a Zacks Rank 1 (Strong Buy) and delivered a trailing four-quarter earnings surprise of 41.6% on average, with a 1.6% loss in the past six months [10] - Frontdoor, Inc. (FTDR) has a Zacks Rank 1 and delivered a trailing four-quarter earnings surprise of 269% on average, with a 57.7% gain in the past six months [10] - MasTec, Inc. (MTZ) has a Zacks Rank 2 (Buy) and delivered a trailing four-quarter earnings surprise of 40.2% on average, with a 53.8% gain in the past six months [11]

Granite Construction Incorporated (GVA) has secured a $71 million contract from the U.S. Army Corps of Engineers to expand and modernize the rail yard at Fort Bliss in El Paso, TX. The project, which is fully funded by federal sources, was included in Granite’s third-quarter 2024 Committed and Awarded Projects (CAP), further solidifying the company’s position in government infrastructure work.Shares of Granite gained 2.6% yesterday during the trading session.Boosting Capacity and Efficiency of GVAThe rail y ...

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Financial Data and Key Metrics Changes - Revenue increased by $159 million or 14% year-over-year, reaching $1.1 billion in Q3 2024, driven by higher levels of backlog [43][44] - Gross profit rose by $36 million or 22%, with an adjusted EBITDA improvement of $23 million or 18% [43][44] - Operating cash flow improved significantly by $249 million year-over-year, totaling $284 million for the first nine months of 2024 [47][48] Business Line Data and Key Metrics Changes - In the construction segment, revenue totaled $1.1 billion, reflecting a 14% increase year-over-year, with gross profit margin at 16% [32][44] - The materials segment saw revenue increase by $24 million year-over-year to $195 million, with gross profit up to $32 million [46] - Cash gross profit margins in the materials segment remained strong at 22%, driven by price increases and newly acquired businesses [46] Market Data and Key Metrics Changes - The company reported strong performance across its geographies, particularly in California, Alaska, and Utah [44] - Public funding supports approximately 75% of construction revenue, with expectations for continued growth in both public and private sectors [16][17] - The company anticipates organic revenue growth at a compounded annual growth rate of 6% to 8% through 2027 [19][74] Company Strategy and Development Direction - The company aims to grow revenue and increase margins in both construction and materials segments, with a focus on de-risking its project portfolio and expanding geographically [10][12] - A strategic investment in automation and other projects is expected to drive production costs down and improve margins in the materials segment [26] - The company plans to pursue bolt-on acquisitions and geographical expansion to strengthen its market position [20][21] Management's Comments on Operating Environment and Future Outlook - Management expects the public markets to remain strong, supported by ongoing infrastructure funding from the IIJA [13][14] - The company is optimistic about future revenue growth despite some project delays, which are not unusual in the industry [32][70] - There is confidence in achieving further margin improvements in 2025, driven by a strong project pipeline and operational excellence [56][93] Other Important Information - The company has a strong cash position of $472 million, allowing for potential acquisitions and share repurchases [49][50] - Capital expenditures for the year are expected to be approximately $139 million, with a focus on maintaining discipline in spending [53] - The company narrowed its adjusted EBITDA margin guidance to 10% to 11% for 2024 [52] Q&A Session Summary Question: Long-term outlook on EBITDA margin expansion - Management indicated that the primary driver for EBITDA margin improvement will be the construction segment, with expectations for a ramp-up in Q4 and into 2025 [61][62] Question: Causes of project delays into 2025 - Delays were attributed to owner-driven factors, including notice to proceed delays and changes in conditions [69][70] Question: Organic revenue growth rate and market dynamics - The company expects a 6% to 8% organic revenue growth rate, with more confidence in the public market compared to the private sector [72][74] Question: Capital allocation strategy regarding acquisitions and share repurchases - The company plans to balance investments in M&A and share repurchases, with a focus on maintaining a strong cash position [75][79] Question: Pricing expectations for aggregates and asphalt - The company anticipates high single-digit price increases for aggregates and low single-digit increases for asphalt in 2025, supported by strong public market visibility [86]

[Financial Performance Overview](index=1&type=section&id=Granite%20Reports%20Third%20Quarter%202024%20Results) [Third Quarter 2024 Results](index=1&type=section&id=Third%20Quarter%202024%20Results) Granite reported strong third-quarter 2024 results with a 14% year-over-year revenue increase to $1.3 billion, with net income and earnings per share seeing significant growth, and record Committed and Awarded Projects (CAP) of $5.6 billion Q3 2024 Key Financial Metrics | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $1.3 billion | $1.1 billion | +14% YoY | | **Net Income** | $79 million | $58 million | +36.2% YoY | | **Diluted EPS** | $1.57 | $1.13 | +38.9% YoY | | **Adjusted Net Income** | $91 million | $77 million | +18.2% YoY | | **Adjusted Diluted EPS** | $2.05 | $1.72 | +19.2% YoY | | **Gross Profit** | $203 million | $167 million | +21.6% YoY | | **Adjusted EBITDA** | $149 million | $126 million | +18.3% YoY | - Committed and Awarded Projects (CAP) reached a record **$5.6 billion**, showing a sequential increase of **$44 million** and a year-over-year increase of **$35 million**[1](index=1&type=chunk)[3](index=3&type=chunk) - The company expanded its southeast home market through the acquisition of Dickerson & Bowen, Inc[1](index=1&type=chunk) [Nine Months 2024 Results](index=1&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202024%20Results) For the first nine months of 2024, Granite's revenue grew by $455 million to $3.0 billion, with net income surging to $85 million, a substantial increase from $18 million in the prior-year period Nine Months 2024 Key Financial Metrics | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $3.0 billion | $2.6 billion | +17.5% YoY | | **Net Income** | $85 million | $18 million | +372.2% YoY | | **Diluted EPS** | $1.79 | $0.40 | +347.5% YoY | | **Adjusted Net Income** | $158 million | $110 million | +43.6% YoY | | **Adjusted Diluted EPS** | $3.56 | $2.47 | +44.1% YoY | | **Gross Profit** | $422 million | $302 million | +39.7% YoY | | **Adjusted EBITDA** | $293 million | $204 million | +43.6% YoY | - Year-to-date operating cash flow increased by **$249 million** compared to the same period in the prior year[1](index=1&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) [Construction Segment](index=2&type=section&id=Construction%20Segment) The Construction segment delivered strong year-over-year growth in both the third quarter and the first nine months of 2024, driven by higher CAP levels, favorable weather, and contributions from acquisitions, with gross profit margin also expanding Construction Segment Performance (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $1,080,705 | $945,698 | $2,593,872 | $2,198,527 | | **Gross Profit** | $170,685 | $137,162 | $362,885 | $253,021 | | **Gross Profit Margin** | 15.8% | 14.5% | 14.0% | 11.5% | - Committed and Awarded Projects (CAP) increased to a record **$5.6 billion**, providing a strong foundation for future revenue[7](index=7&type=chunk) [Materials Segment](index=2&type=section&id=Materials%20Segment) The Materials segment reported revenue growth of 13.8% in Q3 and 15.8% year-to-date, primarily due to contributions from acquired businesses and higher asphalt and aggregate sales prices, reflecting the positive impact of acquisitions and pricing power Materials Segment Performance (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $194,805 | $171,122 | $436,399 | $376,913 | | **Gross Profit** | $32,264 | $29,481 | $59,060 | $49,067 | | **Gross Profit Margin** | 16.6% | 17.2% | 13.5% | 13.0% | | **Cash Gross Profit** | $43,202 | $36,203 | $89,718 | $67,581 | - Revenue growth was driven by acquired businesses and higher sales prices, which successfully offset a decrease in asphalt volumes[8](index=8&type=chunk) [Outlook and Strategy](index=1&type=section&id=Outlook%20and%20Strategy) [2024 Full-Year Guidance](index=3&type=section&id=2024%20Full-Year%20Guidance) Granite updated its full-year 2024 guidance, maintaining its revenue forecast while narrowing and raising the adjusted EBITDA margin range to 10%-11%, and increasing its SG&A expense forecast due to higher incentive compensation Updated 2024 Full-Year Guidance | Metric | Updated 2024 Guidance | Previous 2024 Guidance | | :--- | :--- | :--- | | **Revenue** | $3.9B - $4.0B | Unchanged | | **Adjusted EBITDA Margin** | 10% - 11% | 9.5% - 11.5% | | **SG&A as % of Revenue** | 8.3% - 8.5% | 7.5% - 8.0% | | **Effective Tax Rate (Adjusted)** | Mid-20s | Not specified | | **Capital Expenditures** | ~$130 million | Not specified | [Long-Term Targets and Market View](index=1&type=section&id=Long-Term%20Targets%20and%20Market%20View) The CEO expressed a positive long-term outlook, targeting organic growth of 6-8% CAGR through 2027, supported by the federal infrastructure bill and a healthy private market, with plans for materials-focused acquisitions and share repurchases - The company's 2027 financial targets anticipate organic revenue growth at a CAGR of **6% to 8%**, with continued adjusted EBITDA margin expansion[3](index=3&type=chunk) - Management believes the public market will be supported for years by the federal infrastructure bill and sees numerous growth opportunities in the private market[3](index=3&type=chunk) - Future capital allocation strategy includes pursuing bolt-on and larger materials-focused acquisitions and returning value to shareholders through share repurchases[3](index=3&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2024, Granite's balance sheet showed total assets of $3.13 billion, an increase from $2.81 billion at the end of 2023, supported by increases in cash, receivables, and goodwill, while total liabilities also rose and total equity saw a modest increase Key Balance Sheet Items (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Total Current Assets** | $1,814,102 | $1,643,451 | | **Total Assets** | $3,130,925 | $2,813,540 | | **Total Current Liabilities** | $1,164,826 | $1,029,883 | | **Total Liabilities** | $2,061,246 | $1,786,574 | | **Total Equity** | $1,069,679 | $1,026,966 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statement of operations for the third quarter and first nine months of 2024 reflects strong top-line growth translating to significantly improved profitability, with total revenue increasing to $3.03 billion and net income attributable to Granite surging to $84.9 million for the nine months ended September 30, 2024 Key Income Statement Items (in thousands) | Account | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $1,275,510 | $1,116,820 | $3,030,271 | $2,575,440 | | **Gross Profit** | $202,949 | $166,643 | $421,945 | $302,088 | | **Operating Income** | $104,298 | $73,818 | $146,819 | $59,429 | | **Net Income Attributable to Granite** | $78,951 | $57,624 | $84,863 | $17,601 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2024, net cash provided by operating activities was $283.5 million, a significant improvement from the prior-year period, while investing activities used $211.1 million and financing activities used $27.8 million, resulting in a $44.6 million increase in cash and cash equivalents Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $283,549 | $34,198 | | **Net Cash used in Investing Activities** | ($211,107) | ($89,270) | | **Net Cash provided by (used in) Financing Activities** | ($27,819) | $53,205 | | **Net Increase (Decrease) in Cash** | $44,623 | ($1,867) | | **Cash and Cash Equivalents at End of Period** | $462,286 | $292,124 | [Non-GAAP Financial Measures Reconciliation](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) [EBITDA and Adjusted EBITDA Reconciliation](index=11&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) The company's non-GAAP measures show strong underlying performance, with Adjusted EBITDA increasing to $149.3 million in Q3 2024 and the margin improving to 11.7%, while for the nine-month period, Adjusted EBITDA grew to $293.2 million EBITDA and Adjusted EBITDA (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **Net Income Attributable to Granite** | $78,951 | $57,624 | $84,863 | $17,601 | | **EBITDA** | $138,768 | $104,542 | $218,541 | $105,913 | | **Adjusted EBITDA** | $149,280 | $126,313 | $293,196 | $203,568 | | **Adjusted EBITDA Margin** | 11.7% | 11.3% | 9.7% | 7.9% | [Adjusted Net Income Reconciliation](index=12&type=section&id=Adjusted%20Net%20Income%20Reconciliation) After adjustments, Granite's adjusted net income for Q3 2024 was $90.5 million, or $2.05 per diluted share, compared to $76.7 million, or $1.72 per diluted share, in Q3 2023, with adjusted diluted EPS for the nine-month period reaching $3.56 Adjusted Net Income and EPS | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **GAAP Net Income (in thousands)** | $78,951 | $57,624 | $84,863 | $17,601 | | **Adjusted Net Income (in thousands)** | $90,535 | $76,654 | $158,303 | $109,724 | | **GAAP Diluted EPS** | $1.57 | $1.13 | $1.79 | $0.40 | | **Adjusted Diluted EPS** | $2.05 | $1.72 | $3.56 | $2.47 | [Materials Segment Cash Gross Profit Reconciliation](index=13&type=section&id=Materials%20Segment%20Cash%20Gross%20Profit%20Reconciliation) The Materials segment's cash gross profit, a non-GAAP measure, was $43.2 million in Q3 2024, up from $36.2 million in Q3 2023, with the cash gross profit margin improving to 22.2% from 21.2%, indicating stronger operational profitability before non-cash charges Materials Segment Cash Gross Profit (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | **Gross Profit** | $32,264 | $29,481 | $59,060 | $49,067 | | **Depreciation, Depletion & Amortization** | $10,938 | $6,722 | $30,658 | $18,514 | | **Cash Gross Profit** | $43,202 | $36,203 | $89,718 | $67,581 | | **Cash Gross Profit Margin** | 22.2% | 21.2% | 20.6% | 17.9% |

One of my better calls over the last year or so has been Granite Construction (NYSE: GVA ), a company that focuses on the construction and rehabilitation of roads, bridges, rail lines, airports, and more. It is also involved in Crude Value Insights offers you an investing service and community focused on oil and natural gas. We focus on cash flow and the companies that generate it, leading to value and growth prospects with real potential. Subscribers get to use a 50+ stock model account, in-depth cash flow ...

Core Insights - Granite Construction Incorporated (GVA) has secured a $34 million contract for seismic improvements at Oakland International Airport, aimed at protecting the runway from water intrusion [1] - The project will utilize cement deep soil mixing (CDSM) to strengthen 4,200 linear feet of the dike, with construction expected to start in Q1 2025 and finish by Q3 2026 [2] - GVA's revenue for 2024 is projected to be between $3.9 billion and $4 billion, with an adjusted EBITDA margin of 9.5% to 11.5% [6] Company Performance - GVA's shares have increased by 33.8% over the past three months, outperforming the Zacks Building Products - Heavy Construction industry's growth of 19.6% [5] - The company has consistently received contracts due to strong execution and is expanding its business through acquisitions and investments [5] - In 2023, GVA reported revenues of $3.5 billion, with SG&A at 8.4% and an adjusted EBITDA margin of 8% [6] Earnings Outlook - EPS estimates for 2024 remain stable at $5.24, indicating a year-over-year growth of 66.9% [7] - GVA has exceeded analysts' EPS expectations in three of the last four quarters, averaging a 26.4% beat [7] Market Position - GVA is focused on building a high-quality CAP portfolio, benefiting from a favorable public funding environment and a resilient private market [3] - The company's CAP includes unearned revenue and other awards, reflecting its future revenue expectations from executed contracts [4]