Blowout quarterly results released by Great Lakes Dredge & Dock (GLDD) on May 7 have its shares up over 30% since. Q1 contract revenues climbed 25.7% year-over-year to $198.7 million, $28.3 million above the consensus view, boosted by increased coastal protection and capital project activity. The company also benefited from having its vessels spend less time in dry dock than it had previously expected, although some of that work was pushed into Q2. Those elements more than made up for a decrease in rivers & lakes and maintenance project work. And further boosted by a favorable shift in mix to higher-margin projects, improved utilization and project performance, the company went from a loss of 5 cents per share last year to earning 31 cents, more than four times better than the 7-cent profit projected by Wall Street.
Because some of the ship maintenance expected in Q1 was pushed into the current quarter—which already had several drydockings on schedule—GLDD expects to see a sizable sequential decrease in revenue and earnings. However, this maintenance-related activity had been communicated well in advance and is actually good news since these planned drydockings are in preparation for new work, including the commencement of a liquefied natural gas project in the middle of the year.
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What’s more, work on its recently awarded Freeport port deepening and Sabine-Neches Waterway channel improvement projects in Texas—two of the largest projects ever undertaken by the company—is under way. With the record 2024 U.S. Army Corps of Engineer’s budget of $8.7 billion, the bid market is expected to remain strong, particularly in GLDD’s capital and coastal-protection target markets. Together, this provides additional confidence that higher-margin capital work will only keep becoming a bigger portion the company’s business in the coming quarters. This bodes well for its new dredge, Galveston Island, which was placed into operation and contributed to the strong performance in Q1. With two new ships expected to join its fleet in 2025, I think GLDD is in great position to continue generating operating results that exceed the current consensus view, which would allow its shares to add to their recent gains.
Julius Juenemann, CFA is the equity analyst and associate editor of the Forbes Special Situation Survey and Forbes Investor investment newsletters. Great Lakes Dredge & Dock (GLDD) is a current recommendation in the Forbes Investor. To access this and the other stocks being recommended through the Forbes Investor, click here to subscribe.
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