On Jan 2, Zacks Investment Research upgraded Great Lakes Dredge & Dock Corporation (GLDD) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold), largely on the back of steady inflow of projects, improved fleet utilization and acquisitions.
Why the Upgrade?
Share price of Great Lakes Dredge & Dock has been on the rise since the company announced that it has been awarded the New Jersey shore and the Arthur Kill Channel projects, together valued at over $210 million, on Dec 15. The projects will be included in the company’s backlog and will help in improving fleet utilization.
This was in line with company’s declaration in the third quarter of 2014 that its fleet will be fully utilized on projects including a coastal protection project in New Jersey along with additional Superstorm Sandy projects during the fourth quarter.
Even though Great Lakes Dredge & Dock reported a loss of 1 cent per share of in the third quarter of 2014 as opposed to the prior-year quarter earnings of 11 cents per share, the company remained optimistic for the fourth quarter of 2014 and ahead owing to different valuable projects, improved fleet utilization and acquisitions.
The company will be utilizing its fleet on the coastal protection project in New Jersey, the Freeport, TX Channel widening, Port Miami deepening and the Delaware River deepening projects. Moreover, the company remains confident about the bid market which will enable it to fill its backlog.
In addition, two of Great Lakes Dredge & Dock’s Middle East-based cutter suction dredges will commence dredging in early 2015 and will work through the third quarter of 2015 as part of a consortium on a project to deepen and widen the Suez Canal. The project is valued at $140 million. Three hopper dredges also continue to execute on the $32.5 million land reclamation job in Bahrain through early 2015; work will continue on the Wheatstone project in Australia through the first quarter of 2015.
Further, the acquisition of Magnus Pacific Corporation (Magnus), on Nov 4, was in line with the company’s long-term strategy and will aid the environmental & remediation segment. The transaction adds approximately $90 million in backlog, most of which is expected to be worked off in 2015. Further, the company was low bidder on a record volume of bids and commenced construction on the new ATB hopper dredge. These factors remain tailwinds for the company.
In line with the upbeat outlook for the next year, the Zacks Consensus Estimate for 2015 has moved north 31% to 55 cents with two analysts revising their estimates upwards.
Other Stocks to Consider
Other stocks worth considering in the sector include Headwaters Incorporated (HW), Owens Corning (OC) and Trex Co. Inc. (TREX). While Headwaters and Owens Corning sport a Zacks Rank #1 (Strong Buy), Trex holds a Zacks Rank #2 (Buy).
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