Granite Construction Still Experiencing Margin Pressure

Goldman Sachs has published a research report on Granite Construction Inc. GVA after the company reported 3Q EPS just below expectations. In the report, Goldman Sachs writes "GVA reported 3Q2010 EPS of $0.78 (excluding a $0.21 tax benefit) vs. GS/consensus expectations of $0.81/$0.79. New awards of $667mn (GS: $551mn) were strong, implying a book-to-bill of 1.15X. A key driver was increased traction on large projects (book-to-bill: 2.1X). Gross margins declined by 320 bps yoy to 11.4% reflecting tough competition on small projects. GVA announced a fixed asset impairment charge of $89-$133mn. GVA also reiterated a $10-$12mn 4Q severance charge, which will translate to annual savings of $38mn." Goldman Sachs maintains its Neutral rating and $26 price target. Granite Construction closed yesterday at $26.80.