Will Great Lakes' (GLDD) Contract Winning Spree Aid in 2024?
Great Lakes Dredge & Dock Corporation’s GLDD shares have been rallying of late. It spiked 16% in a month, strongly outperforming the Zacks Building Products - Heavy Construction industry’s 3.3% improvement, the Zacks Construction sector’s 6.3% rise and the S&P 500 Index’s 3.4% increase.
This is further supported by the company’s 2024 sales and earnings growth projection. The Zacks Consensus Estimate for 2024 sales and earnings reflect growth of 21.5% and 2,016.7%, respectively, from 2023. Also, it has a Growth Score of A, which solidifies its growth potential.
Let’s check the driving factors that might boost the company’s performance in the future.
Strong Bidding Activities are Driving the Stock
Great Lakes is the largest provider of dredging services in the United States. The company mainly banks on strong domestic dredging operations, high equipment utilization, solid project execution and savings from restructuring.
Recently, it received five dredging project contracts totaling $173.7 million. The contracts were added to the 2023 backlog of capital, coastal protection and maintenance work.
Great Lakes ended the third quarter with $1.03 billion of dredging backlog, which does not include the $50 million of its performance obligations related to offshore wind contracts and $225 million in low bids and options pending awards.
However, the company’s third-quarter results were impacted by vessel drydocks and idle equipment due to market delays in 2022 and the first half of 2023. Despite these challenges, it continued to bid on projects and build a solid backlog for the fourth quarter and full-year 2024. GLDD ended the third quarter with $1.03 billion of total backlog versus $377.1 million at 2022-end and $452.6 million at third-quarter 2022-end. Of the reported backlog, capital projects comprised 71.2%.
Great Lakes is fully engaged in expanding its core business into the rapidly developing offshore wind energy industry.
U.S. Administration’s Infrastructural Endeavor to Offset Macroeconomic Woes
The announcement of President Joe Biden’s massive infrastructure plan to build modern and sustainable infrastructure and a clean future will have major implications for the U.S. economy and the construction industry over the next five years.
Biden’s plan for accelerated investments in far-reaching areas, from roads and bridges to green spaces, water systems and electricity grids, as well as universal broadband, laid a new foundation for sustainable growth, withstanding the impacts of climate change and improving public health, including access to clean air and clean water. The aforesaid infrastructural expansion plan should be a boon for construction-related companies.
The biggest headwinds for GLDD are labor availability, supply-chain delays and a rise in raw material costs. Meanwhile, the company is susceptible to the cyclical nature of the markets in which clients operate and is dependent on the timing and funding of new awards. Hence, volatility in credits and operating risks associated with economic down cycles are pressing concerns.
Zacks Rank & Key Picks
Currently, GLDD carries a Zacks Rank #4 (Sell).
A few better-ranked stocks in the same space are:
EMCOR Group, Inc. EME is one of the leading providers of mechanical and electrical construction, industrial and energy infrastructure, as well as building services for a diverse range of businesses. It presently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
It has a trailing four-quarter earnings surprise of 25%, on average. The Zacks Consensus Estimate for EME’s 2024 earnings moved up to $12.56 per share from $12.16 over the past 60 days. It has a VGM Score of A.
Granite Construction, Inc. GVA, a Zacks Rank #2 company, is the largest diversified infrastructure firm in the United States. It has been banking on strategic initiatives, inorganic moves and strong bidding activity.
Estimates for GVA’s 2024 earnings are expected to climb by 35.7% year over year. The Zacks Consensus Estimate for GVA’s 2024 earnings moved up to $4.29 per share from $4.20 over the past 30 days. It has a VGM Score of A.
North American Construction Group Ltd. NOA provides equipment maintenance and mining and heavy construction services to the resource development and industrial construction markets in Canada, the U.S. and Australia. Its range of services includes constructability reviews, budgetary cost estimates, design-build construction, project management, contract mining and equipment maintenance.
North American Construction presently has a Zacks Rank #2. NOA’s 2024 earnings estimate moved up to $3.22 per share from $3.19 in the past 30 days. This reflects 51.7% year-over-year growth. It has a VGM Score of A.
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