Granite Construction’s third quarter saw a negative market reaction as the company’s revenue fell short of Wall Street expectations, despite double-digit year-over-year growth. Management attributed the quarter’s performance to strong execution in both the Construction and Materials segments, aided by recent acquisitions and improved project selection. CEO Kyle Larkin emphasized that increased aggregate and asphalt volumes, as well as effective pricing strategies, were key contributors to margin improvement. The quarter’s results also reflected ongoing success in integrating newly acquired businesses and operational enhancements in core markets.
Is now the time to buy GVA? Find out in our full research report (it’s free for active Edge members).
Granite Construction (GVA) Q3 CY2025 Highlights:
- Revenue: $1.43 billion vs analyst estimates of $1.50 billion (12.4% year-on-year growth, 4.5% miss)
- Adjusted EPS: $2.70 vs analyst estimates of $2.50 (7.9% beat)
- Adjusted EBITDA: $215.6 million vs analyst estimates of $197.5 million (15% margin, 9.2% beat)
- The company dropped its revenue guidance for the full year to $4.4 billion at the midpoint from $4.45 billion, a 1.1% decrease
- Operating Margin: 10%, up from 8.2% in the same quarter last year
- Market Capitalization: $4.47 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Granite Construction’s Q3 Earnings Call
- Brent Thielman (D.A. Davidson) asked about the sources of backlog growth and upcoming bidding opportunities. CEO Kyle Larkin attributed strength to continued public market demand and strategic project selection, expecting further backlog growth in the next quarter.
- Brent Thielman (D.A. Davidson) inquired about the limited conversion of backlog into revenue and prospects for acceleration. Larkin explained that revenue ramp-up is weighted toward the fourth quarter, with organic growth projected at around 8%.
- Steven Ramsey (Thomson Research Group) questioned the relative impact of materials orders versus project portfolio quality on margin guidance. Larkin responded that both factors are contributing, with materials margins trending ahead of expectations and strong execution on higher-quality projects.
- Steven Ramsey (Thomson Research Group) sought clarification on operating cash flow drivers and CapEx outlook. CFO Staci Woolsey cited strong collections, claim settlements, and strategic CapEx timing as key factors supporting higher cash flow and a reduction in CapEx as a percentage of revenue.
- Michael Dudas (Vertical Research Partners) asked about integration progress and growth prospects for Warren Paving and Papich Construction. Larkin described early results as exceeding expectations, with strong aggregate demand and a talented team driving expansion opportunities in the Southeast platform.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will monitor (1) the pace and quality of backlog conversion into revenue, particularly as best value projects transition from preconstruction to execution; (2) continued integration and performance of recently acquired businesses in new regions; and (3) the impact of seasonal and weather-related disruptions on project delivery. Execution of automation initiatives and further margin expansion in the Materials segment will also be key indicators of progress.
Granite Construction currently trades at $102.50, in line with $102.75 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).
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