Granite Construction Incorporated GVA, along with Fluor Corporation FLR and Ames Construction, Inc., and Parsons Brinckerhoff Inc. as the lead designer, has been selected by the Arizona Department of Transportation (“ADOT”) to build and maintain a new stretch of the Loop 202 freeway in the Phoenix area. It has been touted as the largest highway project as well as the first public-private partnership highway in Arizona.
The Loop 202 freeway, also known as the South Mountain Freeway, is the last segment required to complete the Loop 202 and Loop 101 freeway system for high-quality regional mobility. Construction is expected to start this year and need up to four years for completion. The freeway will offer three general purpose lanes and one high-occupancy vehicle lane in each direction.
After the submission of an unsolicited public-private partnership proposal in 2013, ADOT had asked for proposals from qualified teams aspiring to develop the 22-mile-long freeway. From the five proposals submitted, three finalists were selected after a qualification assessment.
The three finalists were asked to use innovation to develop alternative concepts that can save both time and money, while conforming to environmental safety standards. The selection was made after a review of the proposals over a period of four months. The decision has been given about three weeks ahead of the award date planned in Jan 2016. The three selected companies were also part of the Connect 202 Partners team. The final segment of the Proposition 400 freeway system will cost $1.9 billion.
Normally, a project of this magnitude is split into several smaller projects. But the South Mountain Freeway will be completed as a single project by one contracting team. A contract is expected to be executed in February to design, build and maintain the freeway. Connect 202 will be responsible for maintaining the South Mountain Freeway for 30 years under the agreements.
Granite Construction posted remarkable third-quarter 2015 results wherein earnings per share of 77 cents marked a whopping 103% year-over-year improvement. Moreover, the company’s total contract backlog increased 4% to $3 billion in the reported quarter. Granite Construction aims to remain focused on executing the large project backlog, along with bidding for and winning new contracts.
Additionally, Granite Construction has partnerships in place and expects to bid on more than $16 billion large projects between now and the end of 2016. Also, over the same period, the company expects to bid on projects worth $5 billion.
Subsequent to third-quarter results, Granite Construction announced that Paso del Norte Trackworks, a joint venture of Granite Construction and RailWorks Track Systems Inc., has been awarded a $61 million transit contract by the Camino Real Regional Mobility Authority. Construction work will begin in Dec 2015 and take approximately two years to finish.
Further, plant efficiency remains the main focus of Granite Construction’s business. This is because operational success and continuous improvement in materials facilities have been aiding cost management.
For 2015, Granite Construction expects consolidated revenue growth in the mid-single digits and consolidated EBITDA margin of 6–8%. The company will also benefit from economic improvement and increased demand. Notably, Granite Construction’s sound backlog and additional awards bode well for its future performance.
Granite Construction currently has a Zacks Rank #4 (Sell). Some better-ranked stocks from the same sector are Dycom Industries Inc. DY and Sterling Construction Co. Inc. STRL. While Dycom Industries sports a Zacks Rank #1 (Strong Buy), Sterling Construction holds a Zacks Rank #2 (Buy).
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