Granite Construction
Granite Construction
GVA
$0.88
1.43%
70%
IBD Stock Analysis
- Working on 64.33 flat base, base-on-base pattern
- Just below early entry of 63.06
- Four quarters of accelerating sales growth
Industry Group Ranking
Emerging Pattern
Flat Base
* Not real-time data. All data shown was captured at
3:27PM EDT on
06/18/2024.
Granite Construction (GVA) is Tuesday’s IBD Stock Of The Day as the provider of construction services and materials rises toward a base-on-base buy point. GVA stock’s second-to-none 99 IBD Composite Rating puts it at the top of the pack in one of the stock market’s best performing industry groups.
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Other standouts in the Building-Heavy Construction industry group include Fluor (FLR), Sterling Infrastructure (STRL), Argan (AGX) and Quanta Services (PWR), which is part of the IBD Leaderboard portfolio of elite stocks.
Infrastructure Boosts GVA Backlog, Margins
Granite, based in Watsonville, Calif., has a lot going for it: the 2021 infrastructure bill, whose spending is now ramping up; a big backlog of work; acquisitions; and price increases.
“We see a continued strong public and private market environment supported by the IIJA (Infrastructure Investment and Jobs Act) and healthy state budgets across our geographies,” CEO Kyle Larkin told analysts on the May 2 Q1 earnings call.
“We’ve been picking up more work through April of this year than where we were last year at the time and our margins on that work has increased as well,” Larkin added.
In Q1, the total value of committed and awarded projects (CAP) rose by $395 million from a year ago to $5.5 billion, dipping $47 million from Q4. The California portion equals $2.4 billion.
Revenue growth continued to accelerate in the first quarter, reaching 20%, after 18%, 11% and 6% growth in the prior quarters, following a 14% decline. Keep in mind, though, that the first quarter is the slowest of the year, with weather a significant factor.
The materials segment accounted for about 15% of revenue in 2023 and 18% of gross profit. Larkin said that the company is on track to meet its target of 10% price increases for construction aggregates and 5% for asphalt.
Granite’s first fully automated plant came online in Arizona this year, with the next in Bakersfield, Calif., set for this month.
CFO Lisa Curtis said that Granite is targeting adjusted margins of 9.5% to 11.5% this year, up from around 8% in 2023.
Granite is “actively pursuing M&A that should drive cash flows and shareholder value,” Larkin said.
GVA Stock Performance
Granite Construction rose 1.4% to 62.86 in Tuesday afternoon stock market action. A move past the June 12 high of 63.06 would flash an early entry opportunity. That would be the trend line sloping down from its May 14 high of 64.33.
GVA found support at its 50-day moving average early last week before springing higher. The bottom of the current base is right near the top of the prior flat-base buy point of 57.93.
The official buy point for the current flat base is 64.33.
GVA is closing in on prior highs seen in 2007 and 2018, both which led to long periods of underperformance.
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