GVA

Image source: The Motley Fool. Thursday, July 30, 2026 at 11 a.m. ET Vice President of Investor Relations - Michael Barker President and Chief Executive Officer - Kyle Larkin Executive Vice President and Chief Financial Officer - Staci Woolsey Operator: Good morning. My name is Chloe, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite 2026 Second Quarter Conference Call. This call is being recorded. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Granite Vice President of Investor Relations, Mike Barker. Michael Barker: Good morning, and thank you for joining us. I'm pleased to be here today with President and Chief Executive Officer, Kyle Larkin; and Executive Vice President and Chief Financial Officer, Staci Woolsey. Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We begin with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects, or CAP, and results. Actual results could differ materially from statements made today. Please refer to Granite's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements, except as required by law. Certain non-GAAP measures may be discussed during today's call and from time to time by the company's executives. These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, cash gross profit and cash gross profit per ton. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website, graniteconstruction.com, under Investor Relations. Now I'd like to turn the call over to Kyle Larkin. Kyle Larkin: Thanks, Mike. Let's start with the Construction segment. I'm pleased to report that CAP growth continued to be strong, increasing $250 million sequentially to $7.4 billion as project wins outpaced revenue burn in what was a very strong growth quarter. The increase was driven by a healthy and active bidding environment across our market as well as the addition of Kenny Seng Construction. This record CAP underscores the strength of our end markets, the effectiveness of our growth initiatives and provides strong visibility into future revenue. We continue to see significant opportunities to grow CAP, leveraging our leadership in publicly funded transportation infrastructure while expanding our presence across a broader set of end markets. Publicly funded work for state and local departments of transportation remains a cornerstone in Granite's business and continues to support both our Construction and Materials segments. Over the past several years, the IIJA has provided significant funding to transportation agencies across our footprint. With a substantial portion of those funds still available for deployment, we continue to benefit from a strong and robust transportation market. In May, the U.S. House of Representatives introduced the BUILD America 250 Act, or BA250. BA250 is designed to be the successor to the IIJA, which is expiring in September. While BA250 does not currently contemplate significant increases in highway funding, we view the draft positively because it shifts the funding mix towards formula-based programs and bridge investments and away from larger discretionary mega-projects. We believe this funding approach aligns well with Granite's geographic footprint and capabilities. While the timing and final content of the bill remain a work in progress, we expect the final bill may have a higher level of funding than the current draft, and we believe bipartisan support for infrastructure investment will sustain elevated funding levels, whether through new legislation or by way of a funding extension. Against this backdrop, we see significant opportunities for continued growth through market share gains in our home markets, increased participation in collaborative contracting delivery methods such as construction manager, general contractor and progressive design build and disciplined geographic expansion, both organically and through acquisitions. These collaborative contracting delivery methods foster earlier engagement with project owners, better alignment throughout project execution and more balanced risk sharing. Over time, this approach has enabled us to build a higher-quality project portfolio and reduce volatility, allowing us to deliver more predictable outcomes, including improved margins. Importantly, Granite has a much broader and more diversified growth platform than it did just a few years ago. By leveraging Granite's geographically diverse home markets, we have strategically expanded into attractive end markets that complement our traditional strengths and deepen relationships with key clients. This includes growing our federal business, increasing our participation in rail and transit infrastructure and establishing a meaningful presence in data center site development. Within federal, we've invested for more than 1 decade to build our capabilities, establish customer relationships and broaden our geographic reach. From the Armed Forces to the Department of Homeland Security to the U.S. Army Corps of Engineers, we have participated in building our nation's federal infrastructure in a variety of civil projects across the United States and Guam. While the recently won tactical infrastructure projects provide near-term revenue growth in 2026 and 2027, we believe the greater opportunity lies in the long-term expansion of our federal business, leveraging the strong customer relationships, proven execution and expertise we have developed. Class 1 railroads continue to make significant investments in their infrastructure with a particular focus on expanding intermodal capacity and increasing the movement from truck traffic to rail. Supported by a strong history of successful project execution and collaboration with these customers, Granite is well positioned to capitalize on growing opportunities within the rail market over the next several years. Mission-critical infrastructure, such as data center site development, is another significant growth opportunity that stretches across our footprint. Granite has over 1 decade of experience working with developers, vertical builders and hyperscalers on the civil infrastructure needs of data center construction, primarily in the Pacific Northwest and Nevada. Earlier this year, we launched a dedicated data center division with specialized leadership and resources to support these important clients across Granite's footprint. This team works alongside our regional operations to pursue, win and successfully deliver data center projects while providing a consistent best-in-class client experience. As a result, data center-related CAP is increasing from $65 million 1 year ago to $223 million at the end of the second quarter. Given the substantial demand driven by AI and digital infrastructure investment, we continue to see a robust pipeline of opportunities across many of our markets and expect this end market to remain an important contributor to CAP growth in 2026 and 2027. The common theme across our rail, federal and data center pursuits is our ability to leverage the capabilities of our geographically diverse home markets to serve strategic clients in attractive end markets. We have the people, equipment, expertise and relationships to capitalize on these opportunities efficiently and at scale. This same platform also positions us to pursue additional end markets over time, including water and power infrastructure, markets that we believe are poised for meaningful long-term investment. Taken together, our record CAP and strong opportunities across public and private markets give us confidence that Granite can continue to grow while driving sustained margin expansion in both the near and long term. Turning to the Materials segment. Second quarter results underscore the strength and resilience of our Materials platform. Severe weather disrupted production and sales activity across the Southeast during the second half of the quarter, but our teams continue to execute well against those challenges. Overall, aggregate and asphalt volumes increased year-over-year, both from acquired companies and on an organic basis. Demand for construction materials remains healthy across our footprint with orders outpacing prior year levels. This demand environment continues to support pricing. And through the second quarter, we are realizing our targeted mid-single-digit aggregate price increases. We also continue to execute on strategic capital improvement projects, including automation, plant investments and reserves expansion. These investments align with our long-term strategy to improve production efficiency, lower operating costs and strengthen our competitive position in our home markets. Finally, we continue to closely monitor the increases in oil prices driven by geopolitical uncertainty in the Middle East. Energy prices during the second quarter were in line with our expectations, and the impact on segment performance was minimal. Increases in liquid asphalt and diesel costs were largely mitigated through a combination of fixed-forward contracts, physical storage, financial hedges and energy surcharges. I'm pleased with the resilient performance of our teams. Demand remains healthy. Pricing is tracking to expectations, and we continue to make investments in the Materials segment that we believe will support long-term growth and margin expansion. Now I'll turn it over to Staci to review our financial performance for the quarter. Staci Woolsey: Thanks, Kyle. We delivered significant second quarter growth by building on the momentum generated in the first quarter and continuing to execute on our strategic priorities. Compared to the same period in the prior year, revenue increased 29% to $1.5 billion, gross profit increased 20% to $239 million, adjusted net income increased by $15 million to $101 million and adjusted EBITDA increased by $34 million to arrive at $186 million. We also generated year-to-date operating cash flow of $142 million. In the Construction segment, revenue increased $270 million or 29% year-over-year to $1.2 billion. Of the growth in the quarter, $98 million or 11% was attributable to acquired businesses, while organic growth contributed $172 million or 18%. Our revenue growth was driven by our record CAP and strong project execution across many of our geographic markets. Gross profit margin increased slightly year-over-year, a strong outcome given the difficult comparison against the prior year. We recognized favorable claim recoveries in both periods. However, the gross profit margin impact was less significant in the current year due to increased revenue this year. As we enter our busiest quarter, the Construction segment is performing ahead of our expectations and is well positioned to deliver strong full year results. Materials segment revenue increased $60 million year-over-year to $248 million with acquired businesses contributing $60 million in the quarter, led by Warren Paving. Total aggregate and asphalt revenue prior to consolidation adjustments between our segments increased $111 million, led by a significant increase in internal asphalt sales during the quarter of $42 million, or 73%. While the majority of our volume growth was driven by the acquired businesses, we also delivered stronger-than-expected organic volume increases. With Materials orders ahead of the prior year and pricing performing in line with expectations, the Materials segment remains on track to deliver another year of profitable growth despite margin headwinds experienced in the second quarter. Gross profit margin decreased 800 basis points and cash gross profit margin decreased 310 basis points, driven by severe weather in the Southeast as well as higher production costs associated with quarry development activities in the quarter. Turning to cash flow. Year-to-date cash provided by operating activities was $142 million compared to $5 million in the prior year. Generating this level of operating cash flow in the first half of the year is a significant achievement and demonstrates the quality of our earnings and execution across the business. We expect our operating cash flow in the second half of the year to be consistent with our traditional seasonality. With this performance through June, we are raising our annual operating cash flow target from 10% to 11% of revenue. The second quarter marked an important step forward in strengthening Granite's capital structure. We secured inaugural credit ratings from Moody's and S&P, successfully completed a $600 million senior unsecured notes offering and called our remaining 3.75% convertible notes. Together, these actions strengthened our balance sheet, enhanced financial flexibility and expanded our access to capital. The proceeds of the senior unsecured notes will mainly be utilized to settle the 3.75% convertible notes. We elected to settle the majority of our conversion obligation with cash rather than shares to minimize dilution. We expect to use approximately $570 million of cash, net of proceeds from the unwind and termination of the associated capped call transactions to settle conversions with the remainder to be settled in shares. Based on our current assumptions, this approach is expected to reduce adjusted diluted shares outstanding by approximately 2 million shares and preserves the financial flexibility to pursue our growth acquisition and capital allocation strategy. With Granite's share price increasing significantly since the 3.75% convertible notes were issued, redeeming the notes ahead of maturity reduces potential future dilution associated with the convertible notes and represents another important milestone in optimizing our long-term capital structure. During the quarter, we recorded nonoperating charges of $363 million related to our convertible notes, which were excluded from adjusted net income and adjusted EBITDA. The primary drivers were a loss on remeasurement of the conversion option derivative embedded in the 3.75% convertible notes and amortization of debt discount. The remaining debt discount of $270 million will be recognized as interest expense in the third quarter. The change in the fair value of the conversion option derivative through the settlement of the notes in the third quarter will be recognized in the income statement as a nonoperating gain or loss as applicable. Our strong cash generation and balance sheet, particularly when coupled with support from the credit market, puts us in an excellent position to continue executing on our M&A and capital allocation strategy, which includes opportunistic share repurchases. We believe we have the capital, balance sheet flexibility and organizational capacity to complete additional acquisitions this year, and we continue to see a robust pipeline of M&A opportunities. Now let's turn to an update on guidance for the year. With our performance in the first half of the year, CAP balance and project opportunities ahead of us, we are increasing our revenue guidance to a range of $5.3 billion to $5.5 billion from a range of $5.2 billion to $5.4 billion. This reflects annual organic growth of approximately 12% and growth of approximately 10% from acquired companies at the midpoint of the range. We are also increasing our organic revenue growth expectation for 2027 from a range of 6% to 8% to above 10%. This represents a substantial increase in our growth outlook and reflects the visibility provided by our CAP, the public infrastructure funding environment and the opportunities we continue to see across our end markets. Our annual guidance for adjusted EBITDA margin, SG&A expense as a percent of revenue, adjusted effective tax rate and CapEx is unchanged. Now I'll turn it back over to Kyle. Kyle Larkin: Thanks, Staci. I'll close with the following points. I am confident that the strength of our public and private end markets, combined with the strategic actions we have taken, leaves us well positioned to continue growing revenue across our footprint, whether serving clients in data center site development, intermodal rail infrastructure, federal projects or our core transportation markets, our teams have the capabilities to deliver. I believe we have the teams, capabilities and expertise necessary to capitalize on the opportunities ahead of us and continue to grow our record CAP. In the Materials segment, we are encouraged by the strength of demand across our markets and the level of orders entering the third quarter. Our teams were resilient through the second quarter, and I believe we remain on track to achieve our margin targets, both in 2026 and 2027. Given our strong first half performance, record CAP and opportunities ahead, we raised our 2026 revenue guidance and increased our expectation for organic growth in 2027. Finally, M&A pursuits are very active. We closed on the Kenny Seng Construction acquisition this quarter and believe we will close on additional transactions in 2026. Disciplined M&A remains an important component of our long-term growth strategy. We continue to evaluate opportunities that strengthen our market position, expand our geographic footprint and create long-term shareholder value. Operator, I will now turn it back to you for questions. Operator: [Operator Instructions] Our first question is from Brent Thielman with Oppenheimer. Brent Thielman: Yes. I guess just first question on the thoughts on Materials and the second half kind of margin recovery opportunity. Obviously, some nuances here in the quarter with adverse weather and some other factors. But maybe you could just talk about your sort of cash, gross profit margin expectations for the year for that business group as we move into the second half. Kyle Larkin: Yes. Thanks, Brent. First, I'll start with some things I think are really positive. In the quarter, demand was strong, as we mentioned, both internal and external, which is good both in the external market. Obviously, we're still seeing a lot of public infrastructure demand, in data centers in certain markets, manufacturing. And our teams are executing well on the pull-through strategy. So I think that's -- not really positive in the quarter. Our pricing is still at mid-single digits on the agg, so that's holding. So from a pricing/demand perspective, we feel really good. It is unfortunate we did have real severe weather in the Southeast, and we put in the ballpark of around $10 million in the quarter. So that obviously has a drag on our margins. But we feel good about the outlook for the full year. Those tons will shift to the right, and we expect to be right where we want to be by the time that we wrap up 2026. Brent Thielman: Got it. Appreciate that, Kyle. I guess just in terms of the -- you kind of improved organic growth outlook for 2027 from 6% to 8% to now plus 10%, Kyle, I mean, in light of not having a highway reauthorization in place and seemingly that getting pushed out, what else kind of -- I guess, what gives you the confidence around that improved profile? If you could just unpack some of the different factors that led you to increase that, it would be helpful to hear. Kyle Larkin: Yes. I think there's probably 2 things that we point to. First is our strong CAP balance. Obviously, it's another record level and highest quality CAP in our opinion in the company history, which is something we've been able to say now for a few years. That CAP gives us a lot of visibility. So today, we have a lot of visibility being halfway through 2026. We raised our guidance for the remainder of this year based on that visibility, and we have a lot more visibility into 2027. I think that's really combined with what we believe is still a healthy market, both in the public and the private sectors. So the bid opportunities are really strong. They continue to be strong, and our teams continue to demonstrate the fact that they can execute within the environment. So we feel very confident in 2026 and in 2027. Operator: The next question comes from Kevin Gainey with Thompson, Davis. Kevin Gainey: I was hoping that maybe we could dive into the comments you made around data centers. You said the backlog up from $60 million to $250 million, I think. Maybe you could talk about the success that your team is having there and then maybe what that can also grow to over time? Kyle Larkin: Yes. So last year, at this time, we had CAP of around $65 million within the data center space. Today, it's around $225 million. And as I mentioned on the last call, we have dedicated leadership within that part of our business today leading that effort. And really, their job is to help coordinate and support all the local businesses we have within our home markets to support these clients and what they're trying to build. So we've made a lot of strides in a very short amount of time, which we're encouraged by. I think the fact that we've had so much success really just in the last 6 months or so, just tells you we have a great service offering for these clients. We can deliver these contracts safely at speed and quality. So we expect to see it grow. As we mentioned before, we want it to be around 10% or better of our annual revenue, and we think we're on track to doing that relatively quickly. Kevin Gainey: Appreciate the color there. And then maybe as well if we could touch on -- I know Brent talked about margin recovery. But maybe if we could talk about if there's going to be further costs associated with quarry development activities that would also kind of hold margins down? Or is that just the onetime or the first half kind of environment? Kyle Larkin: Yes. I look at it more at the first half environment. And I would say the kind of plant setup redevelopment was the ballpark of about a $5 million impact in the quarter. So yes, we wouldn't expect to see that, a similar drag in Q3 or Q4. Operator: The next question comes from Michael Dudas with Vertical Research Partners. Michael, your line may be muted. Okay. Our next question comes from Trey Grooms with Stephens. Trey Grooms: So maybe if we could talk about the kind of preliminary DOT budgets for '27 that are out there. It seems like funding levels look pretty good in Granite states. California budget is above national average. Texas looks down, but I think that's more optical given that they have a biannual budget. But combined with also the -- where we are with reauthorization of IIJA, likelihood of a CR, how are you thinking about the infrastructure demand backdrop kind of looking into the fiscal '27 outlook? Kyle Larkin: Yes. And I think from an overall market perspective, we still feel like the public market is healthy. We're bidding more work. Today, we're capturing more work as well. So that's kind of the first driver that tells us we're improving, and you can see it in our CAP. I think that, from an IIJA perspective, we're about 60% spent. So I think that, obviously, it will get allocated when it expires in September, but that spending will continue into '27, '28 and '29, through '30 likely. So it's not like the funds just turn off. We think that there likely will be some sort of funding extension while they still sort out what BA250 will look like. I think there's 3 things that we look at in BA250 that are positive. First is that it looks like it will maintain a high level of public infrastructure investment, so that's good. The second is it's more formulaic than grant-based. And that really means that the spend will be more directly focused on the types of work that we do and the size of projects that we perform very well. And I think at these levels, combined with our end market strategies, we feel very confident that we can grow our business over the long haul. So I think today, it's to be determined on what this draft bill looks like ultimately, but what we've seen so far will still allow us to do what we want to do as a company. Trey Grooms: Got it. Okay. And then maybe just more for housekeeping. Could you -- any details you could share on the Kenny Seng acquisition, maybe how much it added to CAP or any details around that, please? Kyle Larkin: Yes. Kenny Seng, almost a full quarter with Kenny Seng in Q2, and that business continues to perform very well. Integration has gone very well. Their CAP for the quarter is about $150 million. Operator: The next question comes from Kathryn Thompson with Thompson Research Group. Kathryn Thompson: Just a follow-up on your comments on strong organic sales performance in the second half and in '27. Is the CAP growth that gives you this confidence or other factors? And any other just additional color you can give on that organic cadence? Kyle Larkin: Yes. Thanks, Kathryn. Well, it really is, first and foremost, the CAP, and we have great visibility with our CAP today. Obviously, at this point in the year, we know where things are going to head for the balance of the year in '26. We also know how that CAP is going to -- how it's going to burn through 2027. So that obviously gives us a lot of confidence from a CAP perspective in 2027. And again, the market is healthy and strong. We have a really strong bid pipeline, so we have an idea of the work that we're bidding today, both in the public sector and the private sector. We know what our typical hit rates are, and that gives us a lot of confidence that we'll have the work that we need to make up the balance of that growth in 2027. Kathryn Thompson: Okay. Great. And obviously, a lot of focus on data center site prep work and data center growth. But broadly, stepping back and looking at the forest for the trees, there's just a broad trend of more things being built in the U.S. It would be helpful if you could, even if it's anecdotal story, tell us what you're seeing in terms of how Granite participates in the build-out of the industrial complex in the U.S. market. Kyle Larkin: Yes. And I think that what we like about where we're headed with data center growth, it's something that we've done for 10 years or so, we do it very well. I think the strength of our business is the home markets and the optionality that the home markets bring with our crews. And our crews within our home markets can perform work on data centers, the streets, highways, airports, mine sites, refineries. So it gives us a lot of optionalities to be able to be flexible. And I think that's a real differentiator for Granite. So our job today with our end market strategy is connecting these key clients across these home markets and these geographies so we can deliver for them at a high level. Operator: The next question comes from Adam Bubes with Goldman Sachs. Anuj Khandelwal: This is Anuj on behalf of Adam. So to what extent are you seeing fuel inflation or other cost pressures impact margins across your Construction and Materials business? And as diesel costs move higher, are you generally able to incorporate those increases into new bids and recover them through pricing? Or is there typically a lag? Kyle Larkin: Yes. I think from an overall energy perspective, our teams have done a really nice job mitigating the energy price volatility in the marketplace today. I think from a net dollars perspective, we're a little bit more positive than negative, which is what we indicated we would be last quarter as well. I think our Materials segment teams did a nice job of implementing that energy surcharge back all the way back to Q1 2021, physical storage that we put in place and fixed-forward contracts. So we feel as though we're getting that covered up, again, a little bit more positive than negative. On the Construction side, we do a lot of public works. And with that comes the benefit of owners that typically have escalators and de-escalators for certain commodities. So that gives us some support and then kind of derisk things in that perspective. Some other things that we do that I think that we shifted our business to derisk it from some volatility, is we price most of our work at 100% design as scheduled. Pretty much the universal case. There's a few exceptions to that. And that's important because we can get contractor coverage, supplier coverage, and we can lock those things in, and we can share that risk with those that manage that portion the best. And we also limit our pricing exposure on contracts to really less than 4 years. And that's another part of our derisking effort as a company. And we did all this really to create a consistently profitable business. That was what we set out to do with our derisking efforts related to energy and just in general. And I think our results reflect the effort of the entire team. So I think they've done a really nice job. Anuj Khandelwal: Got it. And one more. So what type of customers are you currently engaging with on future bids? And how would you characterize the depth of data center opportunity pipeline? Kyle Larkin: How do we price in the additional energy costs into future bids? I think that if I understand your question correctly, the answer is when we have 100% design, we can go out and get coverage on all these items that have potential risk associated with them. We can lock those prices in within the contract. There's always a few things that are still out there, maybe diesel prices. So we do make some adjustments and estimate what future diesel prices will be. Labor costs can always be a little bit of one we have to estimate in future years. We do have our union partners out in the West. So most of those are already locked in, but we always have to factor in some sort of labor escalator as well. Those are probably the 2 that you can't completely pin down right on bid day. Operator: Our next question comes from Michael Dudas with Vertical Research Partners. Michael Dudas: Can you hear me now? Kyle Larkin: Yes, we got you, Mike. Michael Dudas: Great. Yes. So Kyle, maybe just refresh us, you talked about certainly organic growth, which is helpful for next year and -- but added with that -- supported by acquisitions. So where do we stand on the pipeline? Remind us like average size, where -- what you're focused on? And in that pipeline, the type of companies, maybe where the valuations are relative to what you've paid for some others in the last 18 to 24 months? And are they more negotiated or open book? Just to get a sense of that and the timing so we can get a sense of how it's going to flow through your business over the next 2 to 3 years. Kyle Larkin: Yes. Thanks, Mike. Right now, there's still a really strong deal pipeline. We have a little bit of feedback there, Mike. There's a real strong deal pipeline still available, and that's going to allow us to execute on these strategic priorities that we've had in place now for a while, which is strengthen and support our existing businesses. Obviously, we want to continue to build out our Southeast platform and look for additional platforms along the way. I'd say that we have a really strong corporate development team. We're out there self-sourcing a lot of our deals. I would say still about 3/4 of them are self-sourced, and about 1/4 are bank-led processes that we look at. I think the valuations stayed fairly consistent, but I think it really depends on what type of company that you'd be looking at, whether it's a VI business, Construction or Materials only. Our expectations this year is we're still going to get a few more deals done by the balance of the year, so that will be in Q3 and Q4. I would say from a range of spend, it'll be somewhere in the $200 million to $400 million range by the end of the year. I mean timing is always hard to predict, but that's our best guess today. Michael Dudas: And is that a spend in 2027 and beyond? Is that the type of level you're looking at? Or is it going to be a little bit more opportunistic? Kyle Larkin: Yes. We've been somewhere between $300 million to $800 million over the last few years. So I think I would kind of look at that as maybe the range of outcomes in future years today. Operator: This is the end of the Q&A session. And now I would like to turn the call back over to Mr. Larkin. Kyle Larkin: Okay. Well, thank you for joining the call today. As always, we want to thank our teams for all the work they put into delivering a strong quarter. Thank you for joining the call and your interest in Granite. We look forward to speaking with you all soon. Operator: The conference has concluded. Thank you for attending today's presentation. You may now disconnect. Before you buy stock in Granite Construction, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Granite Construction wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Granite Construction (GVA) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Granite Construction Incorporated? Here are five stocks we like better. Strong second-quarter results: Revenue rose 29% year over year to $1.5 billion, while adjusted net income reached $101 million and adjusted EBITDA increased to $186 million. Operating cash flow improved sharply to $142 million year to date from $5 million a year earlier. Growth outlook strengthened: Granite raised its 2026 revenue guidance to $5.3 billion–$5.5 billion and expects organic revenue growth above 10% in 2027. Record committed and awarded projects of $7.4 billion, including rising data-center work, supports future visibility. Materials faced temporary pressure: Severe Southeast weather and quarry-development costs reduced materials margins, with management estimating a combined quarterly impact of about $15 million. Granite also completed a $600 million debt offering, settled most convertible notes in cash, and expects $200 million–$400 million of additional acquisition spending in the remainder of 2026. Granite Construction (NYSE:GVA) reported higher second-quarter revenue, profit and operating cash flow, citing growth in both its construction and materials operations, a record committed and awarded projects balance and contributions from acquisitions. Revenue rose 29% from a year earlier to $1.5 billion, while gross profit increased 20% to $239 million, Chief Financial Officer Staci Woolsey said during the company’s second-quarter earnings call. Adjusted net income increased by $15 million to $101 million, and adjusted EBITDA climbed $34 million to $186 million. Year-to-date cash provided by operating activities reached $142 million, compared with $5 million in the prior-year period. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now The company raised its 2026 revenue outlook to a range of $5.3 billion to $5.5 billion, from prior guidance of $5.2 billion to $5.4 billion. It also raised its expectation for organic revenue growth in 2027 to more than 10%, compared with a previous range of 6% to 8%. President and Chief Executive Officer Kyle Larkin said Granite’s committed and awarded projects, or CAP, increased by $250 million sequentially to a record $7.4 billion. Project wins exceeded revenue burn during the quarter, with the acquisition of Kenny Seng Construction also contributing to the balance. → Microsoft Just Flipped the AI Spending Narrative Overnight “This record CAP underscores the strength of our end markets, the effectiveness of our growth initiatives, and provides strong visibility into future revenue,” Larkin said. Construction-segment revenue increased 29% to $1.2 billion. Acquired businesses contributed $98 million of the growth, while organic growth accounted for $172 million. Woolsey said gross profit margin rose slightly year over year despite a difficult comparison with the prior-year period, when the company also recognized favorable claim recoveries. → Carrier Earnings Could Send the Stock to a New All-Time High Granite pointed to public transportation infrastructure, federal projects, rail and transit work, and data center site development as important avenues for growth. Larkin said the company expects infrastructure funding to remain supportive whether through new legislation or an extension of existing programs. The company said the proposed Build America 250 Act, intended as a successor to the Infrastructure Investment and Jobs Act that expires in September, would shift more funding toward formula-based programs and bridge investments rather than larger discretionary projects. Granite views that framework favorably because it aligns with its markets and capabilities, according to Larkin. Data center-related CAP rose to $223 million at the end of the second quarter, from $65 million a year earlier. Granite launched a dedicated data center division earlier this year and said it has more than a decade of experience serving civil infrastructure needs for data center construction, particularly in the Pacific Northwest and Nevada. Larkin said the company aims for data center work to represent about 10% or more of annual revenue and believes it is progressing toward that target. Materials-segment revenue increased by $60 million year over year to $248 million, with acquired businesses, led by Warren Paving, accounting for the increase. Aggregate and asphalt revenue before intersegment consolidation adjustments increased $111 million, including a $42 million, or 73%, increase in internal asphalt sales. Aggregate and asphalt volumes increased both through acquisitions and organically, Granite said. Demand remained healthy, with orders ahead of prior-year levels, while aggregate pricing was tracking at targeted mid-single-digit increases through the second quarter. However, severe weather in the Southeast disrupted production and sales activity during the latter half of the quarter. Woolsey said the materials segment’s gross profit margin declined 800 basis points and cash gross profit margin fell 310 basis points, reflecting weather-related disruption and higher quarry-development production costs. Larkin estimated that severe weather represented about a $10 million impact during the quarter, while plant setup and quarry development activities accounted for approximately $5 million. He said the company does not expect a similar quarry-development drag in the third and fourth quarters and expects volumes affected by weather to shift later in the year. Granite said higher liquid asphalt and diesel costs had a minimal impact in the quarter, as the company used fixed forward contracts, storage, financial hedges and energy surcharges to mitigate volatility. Larkin said the company was “a little bit more positive than negative” on energy costs overall. During the quarter, Granite secured inaugural credit ratings from Moody’s and S&P, completed a $600 million senior unsecured notes offering and called its remaining 3.75% convertible notes. The company intends to use most of the notes proceeds to settle the convertible notes. Granite expects to use approximately $570 million in cash, net of proceeds from the unwind and termination of related cap call transactions, to settle conversions, with the remainder to be settled in shares. Woolsey said the approach is expected to reduce adjusted diluted shares outstanding by approximately 2 million shares under current assumptions. The company recorded $363 million of non-operating charges related to the convertible notes during the quarter, which it excluded from adjusted net income and adjusted EBITDA. Granite expects the remaining $270 million debt discount to be recognized as interest expense in the third quarter. Management also said merger-and-acquisition activity remains active. Granite closed the Kenny Seng Construction acquisition during the quarter, which added roughly $150 million of CAP. Larkin said the company expects to complete additional deals in 2026 and estimated acquisition spending for the remainder of the year could be in a range of $200 million to $400 million. Granite Construction Inc is a publicly traded heavy civil contractor and construction materials producer based in Watsonville, California. The company specializes in delivering large-scale infrastructure projects for government and private clients, focusing on the development, rehabilitation and maintenance of transportation, water resource and industrial facilities. Its turnkey solutions span the full project lifecycle, from preconstruction and design-build to construction management and facilities maintenance. In its construction segment, Granite undertakes highway and bridge building, airport runway and taxiway construction, marine terminal and port improvements, dam and reservoir projects, transit systems and underground utilities. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Granite Construction Q2 Earnings Call Highlights" was originally published by MarketBeat. 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Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Record Committed and Awarded Projects (CAP) of $7.4 billion provides high visibility into future revenue, driven by a robust bidding environment and the acquisition of Kenny Seng Construction. Management attributes strong organic growth to the effective execution of a 'home market' strategy, which leverages local crews and materials across diverse end markets including transportation, federal, and rail. The data center division has seen rapid scaling, with CAP growing from $65 million to $223 million year-over-year as the company capitalizes on AI-driven digital infrastructure demand. Materials segment performance remained resilient despite severe weather in the Southeast, supported by mid-single-digit aggregate price increases and a 73% increase in internal asphalt sales. Strategic shift toward collaborative contracting delivery methods (CMGC and progressive design-build) is intended to reduce project volatility and deliver more predictable, higher-margin outcomes. Energy cost volatility was successfully mitigated through a combination of fixed-forward contracts, physical storage, financial hedges, and energy surcharges implemented since 2021. Increased 2026 revenue guidance to $5.3 billion - $5.5 billion, reflecting approximately 12% organic growth and 10% growth from acquisitions at the midpoint. Raised 2027 organic revenue growth expectations to above 10% (up from 6-8%) based on current CAP quality and a healthy public infrastructure bid pipeline. Management views the proposed BUILD America 250 Act positively as it shifts funding toward formula-based programs and bridge investments that align with Granite's core capabilities. The company expects to close additional M&A transactions in the second half of 2026, targeting a total annual spend between $200 million and $400 million. Operating cash flow targets for 2026 were raised from 10% to 11% of revenue., reflecting improved earnings quality and disciplined project execution. Recorded nonoperating charges of $363 million related to the settlement of 3.75% convertible notes, a move designed to minimize future share dilution and optimize the capital structure. Severe weather in the Southeast and quarry development activities created a combined $15 million headwind to Materials segment margins in the second quarter. The company secured inaugural credit ratings from Moody's and S&P, facilitating a $600 million senior unsecured notes offering to enhance financial flexibility. Management noted that while the IIJA expires in September, approximately 60% of funds have been spent, providing a multi-year tailwind for public infrastructure projects. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expects the $10 million weather-related drag and $5 million quarry development impact to be isolated to the first half, with tons shifting into the second half of the year. Pricing for aggregates remains firm at mid-single-digit increases, supporting the full-year margin outlook. The upgraded outlook is supported by a record CAP balance described as the 'highest quality' in company history, providing visibility well into 2027. Management believes the shift toward formulaic funding in new legislation will favor their project size and geographic footprint over discretionary mega-projects. Granite aims for data center work to represent 10% or more of annual revenue, leveraging specialized leadership to coordinate local operations. The company highlighted its ability to deliver civil infrastructure at the speed and quality required by hyperscalers and AI developers. The deal pipeline remains active with a focus on self-sourced opportunities (75% of deals) rather than bank-led processes. Management expects to spend between $200 million and $400 million on acquisitions in 2026, with future annual ranges potentially reaching $300 million to $800 million.

Image source: The Motley Fool. Thursday, July 30, 2026 at 11 a.m. ET Vice President of Investor Relations - Michael Barker President and Chief Executive Officer - Kyle Larkin Executive Vice President and Chief Financial Officer - Staci Woolsey Operator: Good morning. My name is Chloe, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite 2026 Second Quarter Conference Call. This call is being recorded. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Granite Vice President of Investor Relations, Mike Barker. Michael Barker: Good morning, and thank you for joining us. I'm pleased to be here today with President and Chief Executive Officer, Kyle Larkin; and Executive Vice President and Chief Financial Officer, Staci Woolsey. Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We begin with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects, or CAP, and results. Actual results could differ materially from statements made today. Please refer to Granite's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements, except as required by law. Certain non-GAAP measures may be discussed during today's call and from time to time by the company's executives. These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, cash gross profit and cash gross profit per ton. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website, graniteconstruction.com, under Investor Relations. Now I'd like to turn the call over to Kyle Larkin. Kyle Larkin: Thanks, Mike. Let's start with the Construction segment. I'm pleased to report that CAP growth continued to be strong, increasing $250 million sequentially to $7.4 billion as project wins outpaced revenue burn in what was a very strong growth quarter. The increase was driven by a healthy and active bidding environment across our market as well as the addition of Kenny Seng Construction. This record CAP underscores the strength of our end markets, the effectiveness of our growth initiatives and provides strong visibility into future revenue. We continue to see significant opportunities to grow CAP, leveraging our leadership in publicly funded transportation infrastructure while expanding our presence across a broader set of end markets. Publicly funded work for state and local departments of transportation remains a cornerstone in Granite's business and continues to support both our Construction and Materials segments. Over the past several years, the IIJA has provided significant funding to transportation agencies across our footprint. With a substantial portion of those funds still available for deployment, we continue to benefit from a strong and robust transportation market. In May, the U.S. House of Representatives introduced the BUILD America 250 Act, or BA250. BA250 is designed to be the successor to the IIJA, which is expiring in September. While BA250 does not currently contemplate significant increases in highway funding, we view the draft positively because it shifts the funding mix towards formula-based programs and bridge investments and away from larger discretionary mega-projects. We believe this funding approach aligns well with Granite's geographic footprint and capabilities. While the timing and final content of the bill remain a work in progress, we expect the final bill may have a higher level of funding than the current draft, and we believe bipartisan support for infrastructure investment will sustain elevated funding levels, whether through new legislation or by way of a funding extension. Against this backdrop, we see significant opportunities for continued growth through market share gains in our home markets, increased participation in collaborative contracting delivery methods such as construction manager, general contractor and progressive design build and disciplined geographic expansion, both organically and through acquisitions. These collaborative contracting delivery methods foster earlier engagement with project owners, better alignment throughout project execution and more balanced risk sharing. Over time, this approach has enabled us to build a higher-quality project portfolio and reduce volatility, allowing us to deliver more predictable outcomes, including improved margins. Importantly, Granite has a much broader and more diversified growth platform than it did just a few years ago. By leveraging Granite's geographically diverse home markets, we have strategically expanded into attractive end markets that complement our traditional strengths and deepen relationships with key clients. This includes growing our federal business, increasing our participation in rail and transit infrastructure and establishing a meaningful presence in data center site development. Within federal, we've invested for more than 1 decade to build our capabilities, establish customer relationships and broaden our geographic reach. From the Armed Forces to the Department of Homeland Security to the U.S. Army Corps of Engineers, we have participated in building our nation's federal infrastructure in a variety of civil projects across the United States and Guam. While the recently won tactical infrastructure projects provide near-term revenue growth in 2026 and 2027, we believe the greater opportunity lies in the long-term expansion of our federal business, leveraging the strong customer relationships, proven execution and expertise we have developed. Class 1 railroads continue to make significant investments in their infrastructure with a particular focus on expanding intermodal capacity and increasing the movement from truck traffic to rail. Supported by a strong history of successful project execution and collaboration with these customers, Granite is well positioned to capitalize on growing opportunities within the rail market over the next several years. Mission-critical infrastructure, such as data center site development, is another significant growth opportunity that stretches across our footprint. Granite has over 1 decade of experience working with developers, vertical builders and hyperscalers on the civil infrastructure needs of data center construction, primarily in the Pacific Northwest and Nevada. Earlier this year, we launched a dedicated data center division with specialized leadership and resources to support these important clients across Granite's footprint. This team works alongside our regional operations to pursue, win and successfully deliver data center projects while providing a consistent best-in-class client experience. As a result, data center-related CAP is increasing from $65 million 1 year ago to $223 million at the end of the second quarter. Given the substantial demand driven by AI and digital infrastructure investment, we continue to see a robust pipeline of opportunities across many of our markets and expect this end market to remain an important contributor to CAP growth in 2026 and 2027. The common theme across our rail, federal and data center pursuits is our ability to leverage the capabilities of our geographically diverse home markets to serve strategic clients in attractive end markets. We have the people, equipment, expertise and relationships to capitalize on these opportunities efficiently and at scale. This same platform also positions us to pursue additional end markets over time, including water and power infrastructure, markets that we believe are poised for meaningful long-term investment. Taken together, our record CAP and strong opportunities across public and private markets give us confidence that Granite can continue to grow while driving sustained margin expansion in both the near and long term. Turning to the Materials segment. Second quarter results underscore the strength and resilience of our Materials platform. Severe weather disrupted production and sales activity across the Southeast during the second half of the quarter, but our teams continue to execute well against those challenges. Overall, aggregate and asphalt volumes increased year-over-year, both from acquired companies and on an organic basis. Demand for construction materials remains healthy across our footprint with orders outpacing prior year levels. This demand environment continues to support pricing. And through the second quarter, we are realizing our targeted mid-single-digit aggregate price increases. We also continue to execute on strategic capital improvement projects, including automation, plant investments and reserves expansion. These investments align with our long-term strategy to improve production efficiency, lower operating costs and strengthen our competitive position in our home markets. Finally, we continue to closely monitor the increases in oil prices driven by geopolitical uncertainty in the Middle East. Energy prices during the second quarter were in line with our expectations, and the impact on segment performance was minimal. Increases in liquid asphalt and diesel costs were largely mitigated through a combination of fixed-forward contracts, physical storage, financial hedges and energy surcharges. I'm pleased with the resilient performance of our teams. Demand remains healthy. Pricing is tracking to expectations, and we continue to make investments in the Materials segment that we believe will support long-term growth and margin expansion. Now I'll turn it over to Staci to review our financial performance for the quarter. Staci Woolsey: Thanks, Kyle. We delivered significant second quarter growth by building on the momentum generated in the first quarter and continuing to execute on our strategic priorities. Compared to the same period in the prior year, revenue increased 29% to $1.5 billion, gross profit increased 20% to $239 million, adjusted net income increased by $15 million to $101 million and adjusted EBITDA increased by $34 million to arrive at $186 million. We also generated year-to-date operating cash flow of $142 million. In the Construction segment, revenue increased $270 million or 29% year-over-year to $1.2 billion. Of the growth in the quarter, $98 million or 11% was attributable to acquired businesses, while organic growth contributed $172 million or 18%. Our revenue growth was driven by our record CAP and strong project execution across many of our geographic markets. Gross profit margin increased slightly year-over-year, a strong outcome given the difficult comparison against the prior year. We recognized favorable claim recoveries in both periods. However, the gross profit margin impact was less significant in the current year due to increased revenue this year. As we enter our busiest quarter, the Construction segment is performing ahead of our expectations and is well positioned to deliver strong full year results. Materials segment revenue increased $60 million year-over-year to $248 million with acquired businesses contributing $60 million in the quarter, led by Warren Paving. Total aggregate and asphalt revenue prior to consolidation adjustments between our segments increased $111 million, led by a significant increase in internal asphalt sales during the quarter of $42 million, or 73%. While the majority of our volume growth was driven by the acquired businesses, we also delivered stronger-than-expected organic volume increases. With Materials orders ahead of the prior year and pricing performing in line with expectations, the Materials segment remains on track to deliver another year of profitable growth despite margin headwinds experienced in the second quarter. Gross profit margin decreased 800 basis points and cash gross profit margin decreased 310 basis points, driven by severe weather in the Southeast as well as higher production costs associated with quarry development activities in the quarter. Turning to cash flow. Year-to-date cash provided by operating activities was $142 million compared to $5 million in the prior year. Generating this level of operating cash flow in the first half of the year is a significant achievement and demonstrates the quality of our earnings and execution across the business. We expect our operating cash flow in the second half of the year to be consistent with our traditional seasonality. With this performance through June, we are raising our annual operating cash flow target from 10% to 11% of revenue. The second quarter marked an important step forward in strengthening Granite's capital structure. We secured inaugural credit ratings from Moody's and S&P, successfully completed a $600 million senior unsecured notes offering and called our remaining 3.75% convertible notes. Together, these actions strengthened our balance sheet, enhanced financial flexibility and expanded our access to capital. The proceeds of the senior unsecured notes will mainly be utilized to settle the 3.75% convertible notes. We elected to settle the majority of our conversion obligation with cash rather than shares to minimize dilution. We expect to use approximately $570 million of cash, net of proceeds from the unwind and termination of the associated capped call transactions to settle conversions with the remainder to be settled in shares. Based on our current assumptions, this approach is expected to reduce adjusted diluted shares outstanding by approximately 2 million shares and preserves the financial flexibility to pursue our growth acquisition and capital allocation strategy. With Granite's share price increasing significantly since the 3.75% convertible notes were issued, redeeming the notes ahead of maturity reduces potential future dilution associated with the convertible notes and represents another important milestone in optimizing our long-term capital structure. During the quarter, we recorded nonoperating charges of $363 million related to our convertible notes, which were excluded from adjusted net income and adjusted EBITDA. The primary drivers were a loss on remeasurement of the conversion option derivative embedded in the 3.75% convertible notes and amortization of debt discount. The remaining debt discount of $270 million will be recognized as interest expense in the third quarter. The change in the fair value of the conversion option derivative through the settlement of the notes in the third quarter will be recognized in the income statement as a nonoperating gain or loss as applicable. Our strong cash generation and balance sheet, particularly when coupled with support from the credit market, puts us in an excellent position to continue executing on our M&A and capital allocation strategy, which includes opportunistic share repurchases. We believe we have the capital, balance sheet flexibility and organizational capacity to complete additional acquisitions this year, and we continue to see a robust pipeline of M&A opportunities. Now let's turn to an update on guidance for the year. With our performance in the first half of the year, CAP balance and project opportunities ahead of us, we are increasing our revenue guidance to a range of $5.3 billion to $5.5 billion from a range of $5.2 billion to $5.4 billion. This reflects annual organic growth of approximately 12% and growth of approximately 10% from acquired companies at the midpoint of the range. We are also increasing our organic revenue growth expectation for 2027 from a range of 6% to 8% to above 10%. This represents a substantial increase in our growth outlook and reflects the visibility provided by our CAP, the public infrastructure funding environment and the opportunities we continue to see across our end markets. Our annual guidance for adjusted EBITDA margin, SG&A expense as a percent of revenue, adjusted effective tax rate and CapEx is unchanged. Now I'll turn it back over to Kyle. Kyle Larkin: Thanks, Staci. I'll close with the following points. I am confident that the strength of our public and private end markets, combined with the strategic actions we have taken, leaves us well positioned to continue growing revenue across our footprint, whether serving clients in data center site development, intermodal rail infrastructure, federal projects or our core transportation markets, our teams have the capabilities to deliver. I believe we have the teams, capabilities and expertise necessary to capitalize on the opportunities ahead of us and continue to grow our record CAP. In the Materials segment, we are encouraged by the strength of demand across our markets and the level of orders entering the third quarter. Our teams were resilient through the second quarter, and I believe we remain on track to achieve our margin targets, both in 2026 and 2027. Given our strong first half performance, record CAP and opportunities ahead, we raised our 2026 revenue guidance and increased our expectation for organic growth in 2027. Finally, M&A pursuits are very active. We closed on the Kenny Seng Construction acquisition this quarter and believe we will close on additional transactions in 2026. Disciplined M&A remains an important component of our long-term growth strategy. We continue to evaluate opportunities that strengthen our market position, expand our geographic footprint and create long-term shareholder value. Operator, I will now turn it back to you for questions. Operator: [Operator Instructions] Our first question is from Brent Thielman with Oppenheimer. Brent Thielman: Yes. I guess just first question on the thoughts on Materials and the second half kind of margin recovery opportunity. Obviously, some nuances here in the quarter with adverse weather and some other factors. But maybe you could just talk about your sort of cash, gross profit margin expectations for the year for that business group as we move into the second half. Kyle Larkin: Yes. Thanks, Brent. First, I'll start with some things I think are really positive. In the quarter, demand was strong, as we mentioned, both internal and external, which is good both in the external market. Obviously, we're still seeing a lot of public infrastructure demand, in data centers in certain markets, manufacturing. And our teams are executing well on the pull-through strategy. So I think that's -- not really positive in the quarter. Our pricing is still at mid-single digits on the agg, so that's holding. So from a pricing/demand perspective, we feel really good. It is unfortunate we did have real severe weather in the Southeast, and we put in the ballpark of around $10 million in the quarter. So that obviously has a drag on our margins. But we feel good about the outlook for the full year. Those tons will shift to the right, and we expect to be right where we want to be by the time that we wrap up 2026. Brent Thielman: Got it. Appreciate that, Kyle. I guess just in terms of the -- you kind of improved organic growth outlook for 2027 from 6% to 8% to now plus 10%, Kyle, I mean, in light of not having a highway reauthorization in place and seemingly that getting pushed out, what else kind of -- I guess, what gives you the confidence around that improved profile? If you could just unpack some of the different factors that led you to increase that, it would be helpful to hear. Kyle Larkin: Yes. I think there's probably 2 things that we point to. First is our strong CAP balance. Obviously, it's another record level and highest quality CAP in our opinion in the company history, which is something we've been able to say now for a few years. That CAP gives us a lot of visibility. So today, we have a lot of visibility being halfway through 2026. We raised our guidance for the remainder of this year based on that visibility, and we have a lot more visibility into 2027. I think that's really combined with what we believe is still a healthy market, both in the public and the private sectors. So the bid opportunities are really strong. They continue to be strong, and our teams continue to demonstrate the fact that they can execute within the environment. So we feel very confident in 2026 and in 2027. Operator: The next question comes from Kevin Gainey with Thompson, Davis. Kevin Gainey: I was hoping that maybe we could dive into the comments you made around data centers. You said the backlog up from $60 million to $250 million, I think. Maybe you could talk about the success that your team is having there and then maybe what that can also grow to over time? Kyle Larkin: Yes. So last year, at this time, we had CAP of around $65 million within the data center space. Today, it's around $225 million. And as I mentioned on the last call, we have dedicated leadership within that part of our business today leading that effort. And really, their job is to help coordinate and support all the local businesses we have within our home markets to support these clients and what they're trying to build. So we've made a lot of strides in a very short amount of time, which we're encouraged by. I think the fact that we've had so much success really just in the last 6 months or so, just tells you we have a great service offering for these clients. We can deliver these contracts safely at speed and quality. So we expect to see it grow. As we mentioned before, we want it to be around 10% or better of our annual revenue, and we think we're on track to doing that relatively quickly. Kevin Gainey: Appreciate the color there. And then maybe as well if we could touch on -- I know Brent talked about margin recovery. But maybe if we could talk about if there's going to be further costs associated with quarry development activities that would also kind of hold margins down? Or is that just the onetime or the first half kind of environment? Kyle Larkin: Yes. I look at it more at the first half environment. And I would say the kind of plant setup redevelopment was the ballpark of about a $5 million impact in the quarter. So yes, we wouldn't expect to see that, a similar drag in Q3 or Q4. Operator: The next question comes from Michael Dudas with Vertical Research Partners. Michael, your line may be muted. Okay. Our next question comes from Trey Grooms with Stephens. Trey Grooms: So maybe if we could talk about the kind of preliminary DOT budgets for '27 that are out there. It seems like funding levels look pretty good in Granite states. California budget is above national average. Texas looks down, but I think that's more optical given that they have a biannual budget. But combined with also the -- where we are with reauthorization of IIJA, likelihood of a CR, how are you thinking about the infrastructure demand backdrop kind of looking into the fiscal '27 outlook? Kyle Larkin: Yes. And I think from an overall market perspective, we still feel like the public market is healthy. We're bidding more work. Today, we're capturing more work as well. So that's kind of the first driver that tells us we're improving, and you can see it in our CAP. I think that, from an IIJA perspective, we're about 60% spent. So I think that, obviously, it will get allocated when it expires in September, but that spending will continue into '27, '28 and '29, through '30 likely. So it's not like the funds just turn off. We think that there likely will be some sort of funding extension while they still sort out what BA250 will look like. I think there's 3 things that we look at in BA250 that are positive. First is that it looks like it will maintain a high level of public infrastructure investment, so that's good. The second is it's more formulaic than grant-based. And that really means that the spend will be more directly focused on the types of work that we do and the size of projects that we perform very well. And I think at these levels, combined with our end market strategies, we feel very confident that we can grow our business over the long haul. So I think today, it's to be determined on what this draft bill looks like ultimately, but what we've seen so far will still allow us to do what we want to do as a company. Trey Grooms: Got it. Okay. And then maybe just more for housekeeping. Could you -- any details you could share on the Kenny Seng acquisition, maybe how much it added to CAP or any details around that, please? Kyle Larkin: Yes. Kenny Seng, almost a full quarter with Kenny Seng in Q2, and that business continues to perform very well. Integration has gone very well. Their CAP for the quarter is about $150 million. Operator: The next question comes from Kathryn Thompson with Thompson Research Group. Kathryn Thompson: Just a follow-up on your comments on strong organic sales performance in the second half and in '27. Is the CAP growth that gives you this confidence or other factors? And any other just additional color you can give on that organic cadence? Kyle Larkin: Yes. Thanks, Kathryn. Well, it really is, first and foremost, the CAP, and we have great visibility with our CAP today. Obviously, at this point in the year, we know where things are going to head for the balance of the year in '26. We also know how that CAP is going to -- how it's going to burn through 2027. So that obviously gives us a lot of confidence from a CAP perspective in 2027. And again, the market is healthy and strong. We have a really strong bid pipeline, so we have an idea of the work that we're bidding today, both in the public sector and the private sector. We know what our typical hit rates are, and that gives us a lot of confidence that we'll have the work that we need to make up the balance of that growth in 2027. Kathryn Thompson: Okay. Great. And obviously, a lot of focus on data center site prep work and data center growth. But broadly, stepping back and looking at the forest for the trees, there's just a broad trend of more things being built in the U.S. It would be helpful if you could, even if it's anecdotal story, tell us what you're seeing in terms of how Granite participates in the build-out of the industrial complex in the U.S. market. Kyle Larkin: Yes. And I think that what we like about where we're headed with data center growth, it's something that we've done for 10 years or so, we do it very well. I think the strength of our business is the home markets and the optionality that the home markets bring with our crews. And our crews within our home markets can perform work on data centers, the streets, highways, airports, mine sites, refineries. So it gives us a lot of optionalities to be able to be flexible. And I think that's a real differentiator for Granite. So our job today with our end market strategy is connecting these key clients across these home markets and these geographies so we can deliver for them at a high level. Operator: The next question comes from Adam Bubes with Goldman Sachs. Anuj Khandelwal: This is Anuj on behalf of Adam. So to what extent are you seeing fuel inflation or other cost pressures impact margins across your Construction and Materials business? And as diesel costs move higher, are you generally able to incorporate those increases into new bids and recover them through pricing? Or is there typically a lag? Kyle Larkin: Yes. I think from an overall energy perspective, our teams have done a really nice job mitigating the energy price volatility in the marketplace today. I think from a net dollars perspective, we're a little bit more positive than negative, which is what we indicated we would be last quarter as well. I think our Materials segment teams did a nice job of implementing that energy surcharge back all the way back to Q1 2021, physical storage that we put in place and fixed-forward contracts. So we feel as though we're getting that covered up, again, a little bit more positive than negative. On the Construction side, we do a lot of public works. And with that comes the benefit of owners that typically have escalators and de-escalators for certain commodities. So that gives us some support and then kind of derisk things in that perspective. Some other things that we do that I think that we shifted our business to derisk it from some volatility, is we price most of our work at 100% design as scheduled. Pretty much the universal case. There's a few exceptions to that. And that's important because we can get contractor coverage, supplier coverage, and we can lock those things in, and we can share that risk with those that manage that portion the best. And we also limit our pricing exposure on contracts to really less than 4 years. And that's another part of our derisking effort as a company. And we did all this really to create a consistently profitable business. That was what we set out to do with our derisking efforts related to energy and just in general. And I think our results reflect the effort of the entire team. So I think they've done a really nice job. Anuj Khandelwal: Got it. And one more. So what type of customers are you currently engaging with on future bids? And how would you characterize the depth of data center opportunity pipeline? Kyle Larkin: How do we price in the additional energy costs into future bids? I think that if I understand your question correctly, the answer is when we have 100% design, we can go out and get coverage on all these items that have potential risk associated with them. We can lock those prices in within the contract. There's always a few things that are still out there, maybe diesel prices. So we do make some adjustments and estimate what future diesel prices will be. Labor costs can always be a little bit of one we have to estimate in future years. We do have our union partners out in the West. So most of those are already locked in, but we always have to factor in some sort of labor escalator as well. Those are probably the 2 that you can't completely pin down right on bid day. Operator: Our next question comes from Michael Dudas with Vertical Research Partners. Michael Dudas: Can you hear me now? Kyle Larkin: Yes, we got you, Mike. Michael Dudas: Great. Yes. So Kyle, maybe just refresh us, you talked about certainly organic growth, which is helpful for next year and -- but added with that -- supported by acquisitions. So where do we stand on the pipeline? Remind us like average size, where -- what you're focused on? And in that pipeline, the type of companies, maybe where the valuations are relative to what you've paid for some others in the last 18 to 24 months? And are they more negotiated or open book? Just to get a sense of that and the timing so we can get a sense of how it's going to flow through your business over the next 2 to 3 years. Kyle Larkin: Yes. Thanks, Mike. Right now, there's still a really strong deal pipeline. We have a little bit of feedback there, Mike. There's a real strong deal pipeline still available, and that's going to allow us to execute on these strategic priorities that we've had in place now for a while, which is strengthen and support our existing businesses. Obviously, we want to continue to build out our Southeast platform and look for additional platforms along the way. I'd say that we have a really strong corporate development team. We're out there self-sourcing a lot of our deals. I would say still about 3/4 of them are self-sourced, and about 1/4 are bank-led processes that we look at. I think the valuations stayed fairly consistent, but I think it really depends on what type of company that you'd be looking at, whether it's a VI business, Construction or Materials only. Our expectations this year is we're still going to get a few more deals done by the balance of the year, so that will be in Q3 and Q4. I would say from a range of spend, it'll be somewhere in the $200 million to $400 million range by the end of the year. I mean timing is always hard to predict, but that's our best guess today. Michael Dudas: And is that a spend in 2027 and beyond? Is that the type of level you're looking at? Or is it going to be a little bit more opportunistic? Kyle Larkin: Yes. We've been somewhere between $300 million to $800 million over the last few years. So I think I would kind of look at that as maybe the range of outcomes in future years today. Operator: This is the end of the Q&A session. And now I would like to turn the call back over to Mr. Larkin. Kyle Larkin: Okay. Well, thank you for joining the call today. As always, we want to thank our teams for all the work they put into delivering a strong quarter. Thank you for joining the call and your interest in Granite. We look forward to speaking with you all soon. Operator: The conference has concluded. Thank you for attending today's presentation. You may now disconnect. Before you buy stock in Granite Construction, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Granite Construction wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Granite Construction (GVA) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Raised 2026 revenue guidance by $100 million Q2 revenue increased 29% year-over-year to $1.5 billion Q2 net loss of $278 million compared to net income of $72 million for the same period in the prior year Q2 adjusted net income (1) of $101 million compared to $86 million for the same period in the prior year Q2 diluted EPS of $(6.36) compared to $1.42 for the same period in the prior year and adjusted diluted EPS (1) of $2.16 compared to $1.93 for the same period in the prior year Q2 adjusted EBITDA (1) increased 22% year-over-year to $186 million Committed and Awarded Projects ("CAP") (2) increased sequentially $250 million to $7.4 billion Year-to-date Operating cash flow increased $136 million year-over-year to $142 million WATSONVILLE, Calif., July 30, 2026--(BUSINESS WIRE)--Granite (NYSE: GVA) today announced results for the quarter ended June 30, 2026. Second Quarter 2026 Results Net loss attributable to Granite totaled $278 million, or $(6.36) per diluted share, compared to net income attributable to Granite of $72 million, or $1.42 per diluted share, for the same period in the prior year. The net loss was driven by a $360 million non-operating loss on convertible debt transactions associated with our 3.75% convertible notes. As described in our June 2, 2026 Form 8-K, we elected to settle the conversions of the convertible notes primarily in cash in order to limit dilution to our stockholders. The related losses have been excluded from adjusted net income and adjusted EBITDA. Adjusted net income attributable to Granite totaled $101 million, or $2.16 per diluted share, compared to adjusted net income attributable to Granite of $86 million, or $1.93 per diluted share, for the same period in the prior year. Revenue increased $330 million to $1.46 billion compared to $1.13 billion for the same period in the prior year. Gross profit increased $40 million to $239 million compared to $199 million for the same period in the prior year. Selling, general, and administrative ("SG&A") expenses increased $22 million to $108 million, or 7.4% of revenue, compared to $86 million, or 7.6% of revenue, for the same period in the prior year. Adjusted EBITDA increased $34 million to $186 million compared to $152 million for the same period in the prior year. "We continued to execute against our strategy and deliver on our long-term financial objectives during the quarter," said Kyle Larkin, Granite President and Chief Executive Officer. "Despite headwinds created by severe weather in the southeast, we generated strong organic revenue growth, increased adjusted EBITDA and operating cash flow, completed the acquisition of Kenny Seng Construction, and strengthened our capital structure by issuing senior notes and calling our 3.75% convertible notes for redemption." "We continue to believe public funding for highways, roads and bridges is likely to remain at high levels for the foreseeable future. In addition, we are confident in our ability to grow our business beyond traditional public infrastructure end markets. Over the last several years, we have been positioning Granite to expand our federal portfolio footprint, increase our participation in rail and transit projects, grow our presence in mission critical infrastructure including data center site development, and strengthen our vertically integrated Materials platform. Combined with our leading positions in many of the nation’s fastest growing markets, these initiatives provide Granite with multiple avenues to grow revenue, expand earnings, and create value independent of any single end market or funding source. As we look beyond 2027, our confidence is rooted not only in a supportive funding environment but also in our ability to grow through market diversification, customer expansion, strategic acquisitions, and disciplined execution. Our continued confidence in our ability to grow our business is based on the breadth of opportunities we see across our platform, the quality of the markets we serve, our ability to execute, and the strategic choices we have made over the last several years to build a more diversified, more vertically integrated and more resilient Granite." Six Months Ended June 30, 2026 Results Net loss attributable to Granite totaled $320 million, or $(7.33) per diluted share, compared to net income attributable to Granite of $38 million, or $0.84 per diluted share, for the same period in the prior year. The net loss was driven by a $369 million non-operating loss on convertible debt transactions associated with our 3.75% convertible notes. Adjusted net income attributable to Granite totaled $113 million, or $2.41 per diluted share, compared to $87 million, or $1.94 per diluted share, for the same period in the prior year. Revenue increased $542 million to $2.37 billion compared to $1.83 billion for the same period in the prior year. Gross profit increased $66 million to $349 million compared to $283 million for the same period in the prior year. SG&A expenses increased $47 million to $249 million, or 10.5% of revenue, compared to $202 million, or 11.1% of revenue, for the same period in the prior year. Adjusted EBITDA increased $64 million to $244 million compared to $180 million for the same period in the prior year. Year-to-date operating cash flow increased to $142 million from $5 million for the same period in the prior year and we are raising our annual operating cash flow target from 10% to 11% of revenue. Three and Six Months ended June 30, 2026 (Unaudited - dollars in thousands) Revenue for the three and six month periods increased year-over-year, driven by higher CAP entering the quarter and year along with $98 million and $142 million, respectively, from our recently acquired businesses, Warren Paving, Papich Construction, and Kenny Seng Construction. Gross profit and gross profit margin for the quarter increased year-over-year as a result of the increase in revenue and improved execution across our project portfolio. For the six month period, gross profit margin decreased year-over-year primarily due to a reduction in the favorable impact of claim settlements. CAP increased $250 million sequentially to $7.4 billion, an increase of $1.4 billion year-over-year. As of June 30, 2026, CAP included $624 million of tactical infrastructure projects for U.S. Customs and Border Protection that should be substantially realized over 2026 and 2027. Revenue for the three and six month periods increased year-over-year primarily due to revenue from our recently acquired businesses, Warren Paving, Papich Construction, Cinderlite, and Kenny Seng Construction, of $60 million and $110 million, respectively. Gross profit margin and cash gross profit margin for the three and six month periods decreased year-over-year primarily due to the impact of severe weather in the southeast and higher production costs associated with quarry development activities in the current year. Outlook Our 2026 fiscal year guidance is unchanged with the exception of an increase in revenue as noted below: Revenue increased to a range of $5.3 billion to $5.5 billion from a range of $5.2 billion to $5.4 billion Adjusted EBITDA margin in a range of 12.25% to 13.25% SG&A expense as a percent of revenue in a range of 8.25% to 8.75% of revenue, inclusive of an estimated $48 million of stock-based compensation expense Effective tax rate for adjusted net income in the mid-20s Capital expenditures in a range of approximately $140 million to $160 million, including approximately $50 million in planned strategic materials investments. "During the quarter, we delivered strong growth in both revenue and CAP," said Executive Vice President and Chief Financial Officer, Staci Woolsey. "With our performance through the second quarter and opportunities ahead, we are raising our annual revenue guidance range by $100 million. Given the strength in both public and private infrastructure markets, we expect to deliver sustained elevated organic growth through the second half of 2026 and into 2027 and beyond." We do not provide a reconciliation of forward-looking adjusted EBITDA margin or the most directly comparable forward-looking GAAP measure of net income attributable to Granite because we cannot predict with a reasonable degree of certainty and without unreasonable efforts certain components or excluded items that are inherently uncertain and depend on various factors. For these reasons, we are unable to assess the potential significance of the unavailable information. Conference Call Granite will conduct a conference call today, July 30, 2026, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to discuss the results of the quarter ended June 30, 2026. The Company invites investors to listen to a live audio webcast of the investor conference call on its Investor Relations website, https://investor.graniteconstruction.com. The investor conference call will also be available by calling 1-877-328-5503; international callers may dial 1-412-317-5472. An archive of the webcast will be available on Granite's Investor Relations website approximately one hour after the call. A replay will be available after the live call through August 6, 2026, by calling 1-855-669-9658, replay access code 5480546; international callers may dial 1-412-317-0088. About Granite Granite is America’s Infrastructure Company™. Incorporated since 1922, Granite (NYSE:GVA) is one of the largest diversified vertically-integrated civil contractors and construction materials producers in the United States. Granite’s Code of Conduct and strong Core Values guide the Company and its employees to uphold the highest ethical standards. Granite is an industry leader in safety and an award-winning firm in quality and sustainability. For more information, visit graniteconstruction.com, and connect with Granite on LinkedIn, X, Facebook and Instagram. Forward-looking Statements Any statements contained in this news release that are not based on historical facts, including statements regarding future events, occurrences, opportunities, circumstances, activities, performance, growth, demand, strategic plans, shareholder value, outcomes, outlook, expectations for public funding for highways, roads and bridges, our ability to grow our business, our initiatives provide us with multiple avenues to grow revenue, expand earnings, and create value, our growth and the underlying assumptions, our operating cash flow target as a percent of revenue, our expectation that we will deliver sustained elevated organic growth through the second half of 2026 and into 2027 and beyond, 2026 fiscal year guidance, including revenue, adjusted EBITDA margin, SG&A expense, including estimated stock-based compensation expense, effective tax rate, capital expenditures, including estimated planned strategic materials investments, CAP and results constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as "future," "outlook," "assumes," "believes," "expects," "estimates," "anticipates," "intends," "plans," "appears," "may," "will," "should," "could," "would," "continue," "guidance" and the negatives thereof or other comparable terminology or by the context in which they are made. These forward-looking statements are based on management’s current beliefs, assumptions and estimates. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this news release and, except as required by law; we undertake no obligation to revise or update any forward-looking statements for any reason. Non-GAAP Financial Information The tables below contain financial information calculated other than in accordance with U.S. generally accepted accounting principles ("GAAP"). Specifically, we believe that non-GAAP financial measures such as EBITDA and EBITDA margin are useful in evaluating operating performance and are regularly used by securities analysts, institutional investors and other interested parties, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. We are also providing adjusted EBITDA and adjusted EBITDA margin, non-GAAP measures, to indicate the impact of stock-based compensation, loss on convertible debt transactions, net and other costs, net, which includes strategic acquisition and integration expenses, and in 2025 legal fees for the defense of a former company officer in his now resolved civil litigation with the Securities and Exchange Commission and reorganization costs. We provide adjusted income before income taxes, adjusted provision for income taxes, adjusted net income attributable to Granite, adjusted diluted weighted average shares of common stock and adjusted diluted earnings per share attributable to common shareholders, non-GAAP measures, to indicate the impact of the following: Acquired intangible asset amortization and acquisition-related depreciation; Stock-based compensation; Loss on convertible debt transactions, net; Amortization of convertible debt discount; and Other costs, net as described above. We also provide cash gross profit and cash gross profit per ton for the materials segment and product lines to exclude the impact of non-cash costs from gross profit. Non-cash costs include depreciation, depletion and amortization, and, starting in the first quarter of 2026, unrealized gains and losses from the change in fair value of commodity derivative instruments included in cost of revenue. Cash gross profit and cash gross profit per ton are presented to illustrate the operational performance generated by the assets of the materials segment and its product lines. In addition, we exclude barge delivery revenue from our calculation of average selling price per ton to improve comparability with prior periods. The acquisition of Warren Paving introduced barge delivery revenue starting in the third quarter of 2025. We believe that these additional non-GAAP financial measures are useful in evaluating operating performance, are regularly used by securities analysts, institutional investors and other interested parties, and facilitate comparisons to prior periods and between industry peer companies. Additionally, we use these non-GAAP financial measures in evaluating our performance. However, the reader is cautioned that any non-GAAP financial measures provided by us are provided in addition to, and not as alternatives for, our reported results prepared in accordance with GAAP. Items that may have a significant impact on our financial position, results of operations and cash flows must be considered when assessing our actual financial condition and performance regardless of whether these items are included in non-GAAP financial measures. The methods used by us to calculate non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures provided by us may not be comparable to similar measures provided by other companies. View source version on businesswire.com: https://www.businesswire.com/news/home/20260729515860/en/ Contacts Investors Wenjun Xu, 831-761-7861OrMedia Erin Kuhlman, 831-768-4111

Find your next quality investment with Simply Wall St's easy and powerful screener, trusted by over 7 million individual investors worldwide. Granite Construction (GVA) is back in focus as it prepares to report quarterly results on Thursday before the market opens, with investors watching how current expectations line up with delivered performance. The stock has retreated over the past month and quarter, even as the company readies this earnings update and continues to expand its materials footprint through projects such as the new River Yard aggregate facility in Memphis. See our latest analysis for Granite Construction. Granite Construction’s recent share price momentum has cooled, with the stock down 25.84% on a 30-day share price return basis, even though the 1-year total shareholder return of 24.49% and 5-year total shareholder return of 220.70% remain strong. If this kind of infrastructure story has your attention, it can be a useful time to scan other construction linked opportunities through the 34 power grid technology and infrastructure stocks After a 25.84% pullback in 30 days, while longer term returns remain positive, Granite Construction now sits in a very different spot compared with earlier this year. Does that recent reset offer fair value today, or does it argue for patience on entry price? Against the last close of $117.88, the most followed narrative for Granite Construction points to a fair value of $167.20, framing the recent pullback in a very different light. Read the complete narrative. Curious how that margin story turns into a higher valuation case. The narrative leans heavily on compounding earnings, firmer profitability and a richer multiple in later years. Result: Fair Value of $167.20 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, Granite Construction’s heavy use of acquisitions and higher debt load could change the picture quickly if integration stumbles or funding conditions tighten. Find out about the key risks to this Granite Construction narrative. Given the mix of optimism and caution running through Granite Construction’s story, it makes sense to move quickly and review the details yourself. To see both sides in one place, start with the 5 key rewards and 2 important warning signs. If Granite Construction has sharpened your focus on infrastructure and long term returns, do not stop here. Use the Simply Wall St screener to keep broadening your opportunity set. Spot potential mispriced opportunities early by checking out the 49 high quality undervalued stocks that meet your quality and valuation filters. Strengthen the foundation of your portfolio by screening for companies with robust finances through the solid balance sheet and fundamentals stocks screener (48 results). Aim for ideas others might be overlooking by scanning the screener containing 21 high quality undiscovered gems before they sit on everyone else's radar. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include GVA. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

This article first appeared on GuruFocus. Release Date: July 30, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record capital project backlog of $7.4 billion, providing strong visibility into future revenue. Revenue increased 29% year-over-year to $1.5 billion, driven by organic growth and acquisitions. Adjusted EBITDA rose by $34 million to $186 million, reflecting improved profitability. Data center backlog surged from $65 million to $223 million, signaling strong growth in mission-critical infrastructure. Raised 2026 revenue guidance to $5.3-$5.5 billion and increased 2027 organic growth outlook to above 10%. Severe weather in the Southeast disrupted production and sales, impacting material segment margins. Material segment gross profit margin decreased 800 basis points due to weather and quarry development costs. Non-operating charges of $363 million related to convertible notes settlement weighed on reported earnings. Uncertainty around the Build America 250 Act and potential funding delays for highway reauthorization. Oil price volatility from geopolitical tensions poses a risk to energy costs, though partially mitigated. Here are the key highlights from the Granite Construction Inc (NYSE:GVA) Q2 2026 earnings call, presented as summarized Q&A pairs. Warning! GuruFocus has detected 7 Warning Signs with REG. Is GVA fairly valued? Test your thesis with our free DCF calculator. Q: What is driving the increased organic growth outlook for 2027, especially given the uncertainty around the highway reauthorization bill? A: (Kyle Larkin, President and CEO) The confidence is driven by two main factors. First, our record capital project backlog (cap) provides strong visibility into future revenue, with a significant portion already set to burn through 2027. Second, we continue to see a healthy and strong market in both the public and private sectors, with a robust bid pipeline and strong hit rates that support the balance of our growth expectations. Q: Can you provide more details on the success and growth trajectory of the data center site development business? A: (Kyle Larkin, President and CEO) Our data center cap has grown significantly from $65 million a year ago to $223 million at the end of Q2. We have dedicated leadership coordinating our local businesses to support these clients. We expect this end market to remain an important contributor to cap growth in 2026 and 2027, with a goal of it representing 10% or more of our annual revenue. Q: What are the expectations for the materials segment's margin recovery in the second half of the year, given the weather and cost headwinds in Q2? A: (Kyle Larkin, President and CEO) Despite severe weather in the Southeast (an estimated $10 million impact) and higher quarry development costs (approximately $5 million impact), demand and pricing remain strong. We feel good about the full-year outlook. The lost tons will shift to the right, and we expect to be right where we want to be by the end of 2026, with no similar drag expected from development costs in Q3 or Q4. Q: How is Granite thinking about the infrastructure demand backdrop for fiscal 2027, considering the expiration of the IIJA and the proposed Build America 250 Act? A: (Kyle Larkin, President and CEO) The public market remains healthy. The IIJA is about 60% spent, and funds will continue to be allocated into 2028-2030. We expect a funding extension while BA 250 is finalized. We view the draft BA 250 positively as it is more formula-based, which aligns with our project types and geographic footprint, and we believe bipartisan support will sustain elevated funding levels. Q: What is the status of the M&A pipeline, and what is the expected spend for the remainder of 2026? A: (Kyle Larkin, President and CEO) The deal pipeline remains very strong. We are self-sourcing about three-quarters of our deals. We expect to close a few more transactions in Q3 and Q4 of 2026, with a total spend for the year in the range of $200 to $400 million. The strategy is to strengthen existing businesses, build out the Southeast platform, and look for additional platforms. Q: How is Granite managing the impact of fuel inflation and other cost increases on margins, and can these be passed through to customers? A: (Kyle Larkin, President and CEO) Our teams have done a good job mitigating energy price volatility. On the materials side, we use energy surcharges, physical storage, and fixed forward contracts. On the construction side, public works owners typically have escalators for commodities. We also de-risk by pricing most work on 100% design, locking in supplier coverage, and limiting contract duration to under four years. Q: Can you provide details on the Kennyang Construction acquisition, including its contribution to cap? A: (Stacy Woolsey, EVP and CFO) Kennyang had almost a full quarter in Q2, and the integration is going very well. The business contributed approximately $150 million to our capital project backlog for the quarter. Q: What is the outlook for the construction segment's gross profit margin, given the favorable claim recoveries in the prior year? A: (Stacy Woolsey, EVP and CFO) Gross profit margin increased slightly year-over-year, which is a strong outcome given the difficult comparison. While favorable claim recoveries were recognized in both periods, their impact on margin was less significant in the current year due to the higher revenue base. The segment is performing ahead of expectations and is well-positioned for a strong full year. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Construction and construction materials company Granite Construction (NYSE:GVA) will be reporting results this Thursday before market hours. Here’s what investors should know. Granite Construction beat analysts’ revenue expectations last quarter, reporting revenues of $912.5 million, up 30.4% year on year. It was an incredible quarter for the company, with a beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates. Is Granite Construction a buy or sell going into earnings? Read our full analysis here, it’s free for active Edge members. This quarter, the market is expecting Granite Construction’s revenue to grow 23.8% year on year, improving from the 4% increase it recorded in the same quarter last year. Analysts covering the company have generally reconfirmed their estimates over the last 30 days, suggesting they anticipate the business will stay the course heading into earnings. Granite Construction has missed Wall Street’s revenue estimates multiple times over the last two years. Looking at Granite Construction’s peers in the construction and engineering segment, only Comfort Systems has reported results so far. It exceeded analysts’ revenue estimates, delivering year-on-year sales growth of 50.3%. The stock was down 5.3% on the results. Read our full analysis of Comfort Systems’s earnings results here. Over the past year, investors have repeatedly shifted their focus from one macro narrative to another (AI disruption and AI capex spending to geopolitics, interest rates, and the broader health of the economy). While some of the construction and engineering stocks have shown solid performance in this choppy environment, the group has generally underperformed, with share prices down 3.3% on average over the last month. Granite Construction is down 23.7% during the same time and is heading into earnings with an average analyst price target of $169 (compared to the current share price of $121.29). ONE MORE THING: The $21 AI Application Stock Wall Street Forgot. While Wall Street obsesses over who’s building AI, one company is already using it to print money. And nobody’s paying attention. AI chip stocks trade at ridiculous valuations. This company processes a trillion consumer signals monthly using AI and trades at a third of the price. The gap won’t last. The institutions will figure it out. You need to see this first. Read the FREE Report Before They Notice.

Orion Group Holdings ORN is slated to report its second-quarter 2026 results on July 28, after market close.In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate, respectively. Adjusted earnings per share (EPS) of 5 cents increased from the year-ago profit level of 1 cent. Revenues of $216.3 million increased 14.6% on a year-over-year basis.ORN’s earnings topped the consensus mark in each of the trailing four quarters. The average surprise is shown in the chart below. Image Source: Zacks Investment Research The Zacks Consensus Estimate for second-quarter EPS has remained unchanged at 6 cents over the past 60 days. The estimate indicates a decline from the year-ago EPS of 7 cents. The consensus mark for revenues is pegged at $227.3 million, indicating a 10.7% year-over-year increase.For 2026, Orion is expected to register a 10.6% increase from a year ago in revenues. Its EPS is expected to grow 60% from a year ago. Below is what to expect from the ORN stock. Image Source: Zacks Investment Research Image Source: Zacks Investment Research Orion's second-quarter revenues are expected to be supported by a growing backlog and strong project execution. Management indicated that more than $200 million of additional project awards were secured after the first quarter, including a $100 million port renovation project, a $40 million dredging project and a $24 million data center project. These awards are expected to have supported a stronger second quarter and reinforce confidence in revenue growth through the remainder of 2026. The company also highlighted a healthy $24 billion pursuit pipeline, evenly distributed across 2026 and beyond, providing solid visibility into future work. The Marine segment (which accounted for 67.4% of first-quarter 2026 contract revenues) is expected to have benefited from rising investments in defense infrastructure, port modernization, dredging and energy-related marine projects. Management also pointed to increasing opportunities tied to U.S. Navy infrastructure programs, Coast Guard projects and domestic energy security initiatives. Meanwhile, the Concrete segment (32.6% of contract revenues) should have continued to be driven by robust data center construction, supported by hyperscaler spending, alongside growing opportunities in advanced manufacturing, transportation and cold-storage facilities. The recently expanded site civil and underground utility capabilities are also expected to support larger project wins. Profitability in the second quarter is likely to have improved as newer Marine projects progress beyond their initial phases. Management noted that first-half project timing should normalize as execution advances, while maintaining confidence that pricing, project mix and a healthy opportunity pipeline support stable to improving margins. Continued operational discipline and larger Concrete projects are also expected to have aided margin performance. Management reaffirmed its full-year 2026 guidance, calling for revenues of $900-$950 million, adjusted EBITDA of $54-$58 million and adjusted EPS of 36 cents-42 cents, indicating confidence in execution despite maintaining a conservative outlook. Executives emphasized that second-quarter activity has remained strong and reiterated expectations for a more back-half-weighted year, supported by expanding backlog and continued project awards. Our proven model does not conclusively predict an earnings beat for Orion this time around. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.Earnings ESP: The company has an Earnings ESP of -16.67%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.Zacks Rank: The company currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here. ORN stock has gained 30% year to date (YTD), outperforming the Zacks Building Products - Heavy Construction industry, the Construction sector and the S&P 500 Index. ORN Stock’s Price Performance (YTD) Image Source: Zacks Investment Research Orion competes with Sterling Infrastructure, Inc. STRL, Granite Construction Incorporated GVA and Construction Partners, Inc. ROAD across marine infrastructure, heavy civil construction, transportation and commercial concrete markets. So far this year, Sterling has significantly outperformed the group with a 134.2% gain, reflecting investor enthusiasm for its data center and mission-critical infrastructure exposure. Granite Construction has delivered a more modest 9.8% return, while Construction Partners has declined 4.2% YTD. Orion differentiates itself through its unique combination of marine construction, defense-related waterfront infrastructure and rapidly expanding commercial concrete business, positioning it to capitalize on growing investments in ports, shipyards, data centers and industrial projects. As Orion continues to execute on its expanding backlog and robust project pipeline, its performance will increasingly be measured against these established infrastructure peers across both operational execution and shareholder returns. ORN stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 24.8, as evidenced by the chart below. ORN’s Valuation vs Industry (P/E F12M) Image Source: Zacks Investment Research At 24.8X forward 12-month earnings, ORN trades at a modest premium to the Construction-Heavy industry average of 23.59X, reflecting investor confidence in its improving execution and long-term growth opportunities. Compared with peers, ORN’s valuation sits above GVA (16.1X) but below ROAD (29.35X) and STRL (31.34X). This suggests the market assigns Orion a valuation premium over the broader industry but still values its growth prospects more conservatively than higher-growth infrastructure names such as Sterling and Construction Partners. Continued execution on its expanding backlog, marine infrastructure opportunities and commercial concrete growth could support further multiple expansion over time. Orion enters its second-quarter earnings release with solid business momentum, supported by an expanding backlog, robust project awards, strengthening demand across its Marine and Concrete segments and reaffirmed full-year guidance. With disciplined execution, healthy earnings growth expectations for 2026 and continued exposure to long-term infrastructure investment themes, the company appears well positioned for sustained growth. These strengths make holding ORN stock ahead of its second-quarter earnings release a prudent strategy for long-term investors. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Orion Group Holdings, Inc. (ORN) : Free Stock Analysis Report Sterling Infrastructure, Inc. (STRL) : Free Stock Analysis Report Granite Construction Incorporated (GVA) : Free Stock Analysis Report Construction Partners, Inc. (ROAD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research