Granite Construction (GVA) is positioned to benefit from positive movement in the construction market as project demand increases and pricing improves, resulting in potential upside for GVA, says Jack Kasprzak, Managing Director and Senior Equity Research Analyst at BB&T Capital Markets.
“Granite Construction is a highway and bridge construction company. They perform the actual construction work, and we think they are very well-positioned with the way the markets are moving right now. If this trend continues, and all three main end markets improve, one of the things that should happen is capacity should be soaked up, which translates into improved pricing for projects,” Kasprzak said.
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Kasprzak says that pricing has been under pressure over the last several years because of the environment; however, he now expects the number of bidders per project to decrease as demand rises, improving pricing and benefiting companies such as GVA.
“When I say pricing, I mean the bidding on various types of projects should go up. You had seen a sharp increase in the number of bidders over the last several years because of limited demand, which drove down pricing. If that reverses, and we see more projects so the number of bidders on any one project starts to decline, pricing should improve and there should be some pretty nice margin potential upside at Granite Construction,” Kasprzak said.
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