Granite Construction Incorporated (NYSE:GVA) has been awarded a $39 million sub-contract to construct the Northgate Station in Seattle, WA by Absher Construction Company. The project will be booked in Granite’s third quarter backlog.
The Northgate Station project is a portion of the light rail improvements for Sound Transit’s developing public transit network. Sound Transit plans, builds and operates express bus, light rail and commuter train services throughout King, Pierce and Snohomish counties.
For Granite Construction, scope of work involves the construction of a half-mile of elevated rail structure and connected work. Construction is expected to begin this month and is slated to be completed by Dec 2018. On completion, the new station will provide access to Northgate Mall, bus transfers at the transit center, adjacent park-and-ride facilities, North Seattle Community College along with adjacent homes and businesses.
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At the second quarter end, contract backlog was at a record $3.8 billion, up 25% year-over-year, fueled by new and enhanced client relationships. Record backlog presents the company with opportunities for focused and improved execution. It also provides organic and diversified growth, as well as improved financial results.
Subsequent to the second quarter end, Granite Construction was awarded a $29 million contract by the United States Army Mission and Installation Contracting Command to repair and repave the Campbell Army Airfield in Fort Campbell, KY. The company’s wholly-owned subsidiary, Kenny Construction Company was awarded a $23 million bridge reconstruction contract by the Illinois Department of Transportation related to the Jayne Byrne Interchange Project in Chicago, IL. These projects will be booked into backlog during the third quarter of 2016.
In addition, last month Granite Construction as part of a joint venture (JV) was awarded a Airport Guideway and Stations Design-Build Contract by the Honolulu Authority for Rapid Transportation. Granite Construction will book its 33% share of the $875 million JV project into backlog during the third quarter of 2016.
Further, consecutive quarter of year-over-year margin expansion in the Construction segment, continues to mitigate the weak performance in the Large Project segment. Moving towards the end of 2016, the company believes the FAST Act will begin to provide public markets with some of the well-overdue stability needed to equalize the difficult balance of modern infrastructure funding demands.
Granite Construction is one of the nation’s largest infrastructure contractors and construction materials producers. It belongs to the Building Heavy Construction Industry and has a long-term expected earnings growth rate of 7%. On this metric, the company lags behind its peers EMCOR Group Inc. (NYSE:EME) with a long-term expected earnings growth rate of 15% and Dycom Industries Inc. (NYSE:DY) and MasTec Inc. (NYSE:MTZ) both having a long-term earnings growth rate of 14%.
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