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Will Dredging Business Aid Great Lakes' (GLDD) Q1 Earnings?

Zacks Equity Research

Great Lakes Dredge & Dock Corporation GLDD is slated to report first-quarter 2019 results on Apr 30. This largest provider of dredging services in the United States has a strong record of earnings surprises, having surpassed the Zacks Consensus Estimate in the trailing four quarters, with the average being an impressive 474.1%.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 1300%. Also, earnings increased 16.7% year over year.

However, quarterly revenues of $173.2 million missed analysts’ expectation by 4%. Nonetheless, the said figure increased 13.4% from the prior-year quarter, backed by strong utilization of vessels in its capital and rivers and lakes projects.

Which Way Are Estimates Trending?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

The Zacks Consensus Estimate for the quarter to be reported is pegged at 7 cents, remaining stable over the past 60 days. Nonetheless, this indicates an improvement of 200% from the year-ago quarter. Revenues are expected to be $180 million, suggesting a 22.8% year-over-year increase.

Great Lakes Dredge & Dock Corporation Price and EPS Surprise

Great Lakes Dredge & Dock Corporation Price and EPS Surprise | Great Lakes Dredge & Dock Corporation Quote

Factors That Might Influence the Upcoming Results

Great Lakes is likely to come up with strong results in the to-be-reported quarter, owing to domestic dredging operations, high equipment utilization, solid project execution and savings from the restructuring plan. In fact, a high activity level is expected to have persisted in the first quarter, as it has already booked $40.5 million project work in the first six weeks of the year, which is likely to boost the profit level.

Great Lakes has been booking a significant amount of projects, particularly from its largest domestic customer, the U.S. Army Corps of Engineers, accounted for approximately 75% of total 2018 revenues, and remains positive for the to-be-reported quarter.

The company remains on track with its cost-reduction plan, that includes the closing of non-performing assets and businesses, which is intended to improve financial results in both domestic and international operations.

Backed by the initiatives taken by the company, its margins are likely to improve in the to-be-reported quarter, thereby resulting in higher earnings.

However, lower contribution from foreign dredging, coastal protection and maintenance dredging operations has been impacting its top line over the past few quarters. This can be also attributed to delays in the commencement of a large project in Bahrain. The negative impact is likely to hamper the company’s performance in the to-be-reported quarter as well.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively show that Great Lakes is likely to beat on earnings in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently has a Zacks Rank #2, which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks with a Favorable Combination

Here are some construction companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +5.50% and a Zacks Rank #1.

Apergy Corp. APY has an Earnings ESP of +0.81% and a Zacks Rank #1.

Louisiana-Pacific Corp. LPX has an Earnings ESP of +62.50% and a Zacks Rank #3.

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