Posted on August 7, 2023
Shares of Great Lakes Dredge & Dock (GLDD) popped more than 12% today after the company reported very favorable Q2 results this morning. Specifically, while analysts had been projecting contract revenues to decline just 1.8% for the period to $146.7 million, no one appears to have really been that surprised by the larger 11.2% year-over-year drop to $132.7 million GLDD actually saw, which was consistent with the company’s previously announced expectation for fleet utilization to be lower due to the recent retiring of its Terrapin Island hopper dredge and the cold stacking of two other dredges that were in service for most of the prior-year quarter.
What they were clearly more focused on was the bottom line. And thanks to improved project performance, the company’s successful ongoing cost-reduction actions and fewer drydockings, GLDD went from losing 6 cents per share in Q2 of 2022 to earning 3 cents. The latter was significantly better than the Street’s view for a 10-cent loss and ended its streak of four consecutive quarters of being in the red.
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More importantly, boosted by new business awards of roughly $310 million—which represents about a third of the $930 million in total projects that have gone out for bid so far this year and is nearly three times as much as its next closest competitor has raked in—GLDD entered the current quarter boasting a brimming backlog of over $900 million (consisting of $487.3 million it has in low bids and options pending award to its dredging backlog of $434.6 million). And following the recent award of two of the largest projects ever undertaken by the company, higher-margin capital work makes up an increasingly bigger portion of this growing pie. Thus, even with costs likely to increase again in Q3 as two of GLDD’s dredges will be in the shipyard undergoing their regulatory drydockings along with another previously cold stacked dredge that is being reactivated, the company is in excellent position to finish the year strong as some of these recently won projects commence and the three dredges return to work in Q4. If so, this would provide it with ongoing momentum going into 2024 that I believe will be strong enough to propel the stock even higher from here.