WATSONVILLE — Gains from an improving economic picture overall were not enough to offset significant cost overruns on a large highway project, according to third quarter numbers announced Monday by executives at Granite Construction.
Net income for the third quarter was $11 million, or 28 cents per diluted share, compared with $37.12 million, or 94 cents per share a year ago.
Jim Roberts, president and chief executive officer of Granite, described a bright quarter overshadowed by a more than $50 million cost overrun from an ongoing highway project in Washington as well as some timing issues that didn’t allow the company to reflect strong progress on several major projects.
The company’s Large Project segment yielded “disappointing” results, despite sound core fundamentals and “solid execution,” Roberts said. It illustrates “how project progression and the mix of projects in our portfolio can cause significant profit variability on a quarter-to-quarter basis.”
Despite other encouraging news that the company had secured its largest project ever and a record backlog of more than 2.8 billion in projects, after executives announced their quarterly numbers, company stock dove. Shares dropped more than 7 percent, or $2.34, during the day to close at $30.08.
Granite is one of the country’s largest heavy civil construction and materials business.
For the third quarter, the company reported Large Project Construction revenues of $187.8 million compared with $255.9 million, a year ago; Construction revenues of $470.6 compared with $385.7 million a year ago; and Construction Materials revenues of $83.2 million compared with $86.8 million a year ago.
“We are seeing increasing signs of overall improvement in some of our markets but certainly not in all of our markets,” Roberts said. “The construction backlog is up more than 30 percent year over year and it continues trend positively pointing to continued growth in 2014.
“The private sector continues to build momentum, coupled with state and local budgets showing increased revenues,” Roberts said. “Every market is unique but overall we are very encouraged.”
The company backlog climbed more than $1.2 billion from last year at this time and the plan in the coming year is to join teams to bid on another $10 billion worth of new projects, about half of which would produce potential Granite revenue.
The company also announced major strides in a relatively new area for Granite, a $175 million of projects to build in the power sector.
Company efforts are currently underway to seek reimbursement for costs related to the three-year Washington highway project that has been hampered by numerous surprises along the way including design issues, schedule delays and changes in the scope of the project. It is expected to be completed in mid-2014. The company has submitted a formal claim and Roberts said he expected the majority of costs would eventually be recovered.
On a more positive note, Roberts announced federal loan backing for the company’s largest project ever — the Tappan Zee Bridge project in New York, a more than $3 billion joint venture. Granite’s share of the project is more than $700 million. The project is the largest project in the 63-year history of the NY State Thruway Authority and among the biggest public works projects in U.S. history, Roberts said. It was facilitated by a federal back up loan of up to $1.6 billion, the largest such loan in history.
“This is great news for a great project and good overall news for our industry,” Roberts said.
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At a glance
Granite Construction Inc.
WHAT: Granite Construction Inc. is the holding company for Granite Construction Co., one of the largest heavy civil construction contractors that serves both public and private sector clients in the U.S. The company operates in 25 states in the transportation, power, federal, tunneling, underground, industrial/mining and water resources markets.
HEADQUARTERS: 585 W. Beach St., Watsonville
BACKGROUND: Founded in 1922, the company incorporated in 1990.
LEADERSHIP: James H. Roberts, chief executive officer and president
EMPLOYEES: Granite currently employs about 5,000 salaried and hourly workers.
INFORMATION: 831-724-1011; www.graniteconstruction.com
STOCK PRICE: Monday, GVA shares dove $2.34 to close at $30.08. In the last year, shares have traded between $26.07 and $37.74.
FINANCIALS: Third quarter revenues were nearly $741.58 million, compared with about $728.48 million a year ago. Net income was nearly $11 million, or 28 cents per diluted share, compared with $37.12, or 94 cents per diluted share, a year ago. The company reported a record backlog valued at $2.8 billion. The company reported more than $212 million in cash and cash equivalents compared to more than $287 a year ago.
GUIDANCE: Revising its forecast guidance downward for 2013, the company expects Construction segment revenues of $1.2 billion to $1.3 billion; Large Project Construction segment revenues of $750 million to $800 million; and Construction Materials revenues of $220 million to $230 million.