Great Lakes Dredge & Dock Corporation - Growth & Income

Great Lakes Dredge & Dock Corp (GLDD) recently reported its third consecutive earnings surprise driven by strong sales growth and an expanding gross margin.

The stock has been soaring over the last few months, but because earnings estimates have been rising too, valuation still looks attractive. It is a Zacks #2 Rank (Buy) stock.

Operating Income Up 216%

Great Lakes Dredge & Dock reported third quarter total revenue growth of 24% over the same quarter in 2009. Much of this increase was driven by work on the construction of sand berms off the coast of Louisiana.

The gross profit margin expanded from 12.2% to 18.9% due in large part to higher employment of the domestic fleet. Meanwhile, operating income jumped 216%.

Earnings per share came in at 13 cents, crushing the Zacks Consensus Estimate of 5 cents. It was a 433% increase over the same quarter in 2009.

Outlook

Estimates for both 2010 and 2011 surged following the strong quarter. The Zacks Consensus Estimate for 2010 is $0.54, an 80% increase over 2009 EPS. The 2011 estimate is 2% higher at $0.55.

Estimates have been trending higher over the last several months as the company has delivered three consecutive positive earnings surprises.

Fundamentals

Shares have soared over 60% since mid-September but valuation still looks attractive with a PEG ratio of only 0.5. The stock trades at 13.7x forward earnings, a discount to the industry average of 17.2x.

The company started paying a dividend in late 2007 but hasn't raised it since then. It yields 0.9%.

Great Lakes Dredge & Dock Corporation is the largest provider of dredging services in the U.S. conducting business to maintain and deepen shipping channels, reclaim land from the ocean, and renourish storm damaged coastline. The company was founded in 1890 and has a market cap of $433 million.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

 
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