Posted on February 16, 2019
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Great Lakes Dredge & Dock Corporation GLDD is expected to come up with higher earnings when i t report s fourth-quarter 2018 numbers. However, it doesn’t possess the right combination of the two key ingredients for a likely earnings beat in the to-be-reported quarter. This largest provider of dredging services in the United States, however, has a strong record o f earnings surprises, having surpassed the Zacks Consensus Estimate in the trailing four quarters, with the average being a solid 157.5%.
In fact, in the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 500% and 2.2%, respectively. The company reported earnings of 18 cents in the quarter, reversing the loss of 5 cents per share a year ago. Revenues also increased 25.1% from the prior-year quarter.
How are Estimates Faring?
Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. The Zacks Consensus Estimate for the quarter to be reported is pegged at 1 cent, remaining stable over the past 60 days. Nonetheless, this reflects an improvement of 108.3% from the year-ago quarter. However, revenues are expected to be $180.5 million, down 5.9% year over year.
Great Lakes Dredge & Dock Corporation Price and EPS Surprise
Great Lakes Dredge & Dock Corporation Price and EPS Surprise | Great Lakes Dredge & Dock Corporation Quote
Factors That Might Influence Upcoming Results
A high activity level is expected to have persisted in the fourth quarter, which is likely to help the company boost its profit level. It is particularly benefiting from strong results from its dredging operations, high equipment utilization, solid project execution and savings from the restructuring plan. However, the fourth quarter will include some planned events that are expected to impact equipment utilization.
Meanwhile, for Environmental Infrastructure or E&I segment, the company continues to witness the impact of lower-than-expected contract wins.
Great Lakes remains on track with its restructuring plan, which is intended to improve financial results in both domestic and international operations. Initiated in 2017, management started the execution of a plan to cut general and administrative, as well as overhead expenses, retire certain underperforming and underutilized assets, and write-off pre-contract costs on a project that was never formally awarded. Markedly, the company aims to close its Brazil operations. As of Sep 30, 2018, the company realized $22.5 million of cost savings and remains on track to achieve full run rate savings of $40 million by 2018-end, which are to be recognized in 2019. Yet, it will recognize restructuring charges, as planned, that might affect adjusted EBITDA from continuing operations.
The company made significant efforts to attain its goal to de-lever and reduce net debt. As of September 2018, it successfully decreased net debt by $85 million and has plans to continue to de-lever throughout the fourth quarter and beyond.
Here is What Our Quantitative Model Predicts:
Our proven model does not conclusively show that Great Lakes is likely to beat on earnings in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter .
Zacks Rank: It currently has a Zacks Rank #2, which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
You can see the complete list of today’s Zacks #1 Rank stocks here .
Stocks With Favorable Combination
Here are some construction companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:
Toll Brothers, Inc. TOL has an Earnings ESP of +1.91% and a Zacks Rank #2.
Taylor Morrison Home Corporation TMHC has an Earnings ESP of +1.29% and a Zacks Rank #2.
Forterra, Inc. FRTA has an Earnings ESP of +8.99% and a Zacks Rank #2.
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