Granite Construction (GVA) reports second-quarter loss, delays revenue estimates

Granite Construction (GVA) reported quarterly loss of $1.83 per share versus the Zacks Consensus Estimate of a loss of $2.04. For comparison, a year earlier earnings per share were $0.43. These numbers have been adjusted for one-off items.

This quarterly report presented an earnings surprise of 10.29%. A quarter ago, it was expected that this contractor and construction materials manufacturer would post a loss of $0.22 per share when it actually produced a loss of $0.57, delivering a surprise of -159.09%.

The company has topped consensus EPS estimates twice over the last four quarters.

Granite Construction, which belongs to the Zacks Building Products – Heavy Construction industry, posted revenues of $789.54 million for the quarter ended June 2019, missing the Zacks Consensus Estimate by 0.02%. This compares to year-ago revenues of $807.12 million. The company has not been able to beat the consensus revenue estimate over the last four quarters.

The sustainability of the stock’s current price movement based on recently-released numbers and future earnings expectations will primarily depend on management’s commentary following the earnings conference call.

Granite Construction shares have lost approximately 15.6% since the beginning of the year compared to the S&P 500’s gain of 17.8%.

What’s next for granite construction?

While Granite Construction has underperformed the market this year, the question that comes to investors’ minds is: what’s next for the company’s stock?

There are no easy answers to this key question, but one reliable indicator that can help investors address this is the company’s earnings outlook. This includes not only the current consensus earnings expectations for the coming quarter(s), but also how those expectations have changed recently.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions themselves or rely on a proven rating tool like the Zacks Rank, which has an impressive history of harnessing the power of earnings estimate revisions.

Ahead of this earnings report, the estimate revision trend for Granite Construction was unfavorable. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #5 (Strong Sell) for the stock. Thus, the stock is expected to underperform the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the next quarters and the current fiscal year change in the coming days. The current consensus EPS estimate is $1.41 on revenue of $1.13 billion for the coming quarter and $1.83 on revenue of $3.62 billion for the current fiscal year.

Investors should be aware that industry prospects can also have a material impact on stock performance. In terms of the Zacks Industry Rank, Building Products – Heavy Construction is currently in the bottom 41% of 250+ Zacks industries. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

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