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Granite Shares Up on Highway Project

Zacks Equity Research

Shares of Granite Construction Incorporated (GVA) rose nearly 2% on Sep 18 and further moved up around 1% the next day as it received a $26 million highway project for the city of Bakersfield in Central California. The construction work is in progress and is expected to be completed in the summer of 2015.

The project includes widening of State Route 178 (SR-178) by converting the existing two-lane roadway to a four-lane expressway. Auxiliary lanes will be added to both eastbound and westbound lanes of SR-178 between Fairfax Road and Morning Drive.

Granite is also required to build a six-lane overpass, concrete structures, roadway excavation, storm drains and utility culverts. Granite expects to book the project into backlog during the third quarter of 2013.

Granite, which belongs to the building and heavy construction industry along with Chicago Bridge & Iron (CBI) and China Railway Construction Corp. (CWYCY), reported earnings of $2.7 million or 7 cents per share in the second quarter of 2013 compared with $1.9 million or 5 cents a share in the prior-year quarter. The results lagged the Zacks Consensus Estimate of 32 cents.

Granite’s net sales improved 2% year over year to $550.2 million buoyed by the synergies of the Kenny acquisition. The results however missed the Zacks Consensus Estimate of $652 million. Total contract backlog of the company as of Jun 30, 2013, improved 43% year over year to $2.79 billion.

For full-year 2013, Granite anticipates at least double digit rise in its top line. Granite reaffirmed construction segment revenues forecast in the range of $1.25–$1.4 billion for 2013.

Watsonville, CA-based Granite is one of the largest infrastructure contractors and construction material producers. Granite’s project teams represent some of the best in the industry serving owners in the transportation, power, federal, tunneling, underground, and industrial, mining and water resources markets, which serve both public and private-sector clients.

Granite currently retains a short-term Zacks Rank #3 (Hold). Hopewell Highway Infrastructure Ltd (HHILY) also belongs to the same industry and retains a Zacks Rank #2 (Buy).

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