WATSONVILLE—Third-quarter numbers came in lower than expected for Granite Construction, a nationwide civil contractor, but the Watsonville-based company said Monday that the company would see a greater improvement as soon as projects reached profit milestones and “significant” legal claims settled favorably.
Although net income for the third quarter climbed 17.2 percent year-over-year to $15.3 million, overall revenues were $719.76 million, down 2.7 percent from a year ago in the same quarter. The company’s project backlog climbed to more than $2.97 billion.
There were “modest gains overall,” said James Roberts, Granite chief executive officer and president. “But the weaker than anticipated pace of public spending has been a headwind in the second half of 2014.”
For several years, Roberts has used the company’s quarterly report to analysts and investors as a time to note ongoing frustration over the lack of a long-term federal transportation funding plan. He said again Monday that the private sector remains a key driver for the business while the public sector continues to suffer from continued uncertainty. He added, however, that he was optimistic both political parties saw the need for a better plan.
“I’m pretty confident we will get a nice highway bill by 2015,” he said.
Although some projects got off to a slower than expected start, Roberts said the momentum was in full swing and would continue if the weather held out.
“We’ll be able to build as long as Mother Nature lets us work.”
Construction revenues were down about 5 percent compared to a year ago in the same quarter and large project revenues were down 3.5 percent. The company’s construction materials business was a bright light for investors. Construction materials revenues increase 12.1 percent.
“This positive change is encouraging not only for our materials business, but it also reflects increased opportunities for our other business lines,” Roberts said.
In the last month, the company has announced several big wins including a contract to rebuild hundreds of Pennsylvania bridges, which is expected to add about $360 million to the company’s backlog in the current quarter.
The positive trending backlog “gives us the opportunity to get off to an excellent start to 2015,” said Laurel J. Krzeminski, chief financial officer and senior vice president.
She noted recent delays in public projects were triggered by uncertainty in federal funding and said it “highlights how swiftly current federal funding uncertainty impacts the timing of public sector work.”
After a morning conference call with analysts and investors, company shares tumbled $2.82 or 7.64 percent by the close of market.
WHAT: Granite Construction Inc. is a national civil contractor and construction materials producer, specializing in complex infrastructure projects, including transportation, industrial and federal contracting.
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: The company reported last quarter that it employs about 1,600 salaried, plus about 3,500 hourly employees, a number that fluctuates seasonally.
INFORMATION: 831-724-1011; www.graniteconstruction.com
STOCK PRICE: GVA shares were down $2.82 Monday to close at $34.09. In the last year, shares have traded between $28.35 and $40.55.
FINANCIALS: Revenues for the third quarter of 2014 were $719.76 million compared with $739.75 million a year ago in the same quarter. Net income for the quarter was $15.28 million, or 38 cents earnings per diluted share, compared to $13.04 million, or 33 cents earnings per diluted share, in the third quarter 2013. The company reported about $167.17 million in cash and cash equivalents. The company backlog of projects climbed to more than $2.97 billion.
GUIDANCE: The company maintained its guidance for the year, saying it expected to land near the bottom of a revenue forecast of $2.4 billion to $2.8 billion for 2014.