Summary
Great Lakes Dredge & Dock (NASDAQ:GLDD) exceeded Wall Street’s revenue expectations in Q1 CY2025, with sales up 22.3% year on year to $242.9 million, and its GAAP profit of $0.49 per share was 86.7% above analysts’ consensus estimates. This article provides a comprehensive analysis of the company’s recent performance, highlighting key takeaways from its Q1 results.
Company Overview
Great Lakes Dredge & Dock (NASDAQ:GLDD) is a leading provider of dredging services, land reclamation, and coastal protection projects in the United States and internationally. Founded as Lydon & Drews dredging company, the firm has a rich history of delivering high-quality projects to its clients.
Sales Growth
A company’s long-term sales performance is an essential indicator of its overall quality. While any business can experience short-term success, top-tier companies consistently demonstrate sustained growth over extended periods. Unfortunately, Great Lakes Dredge & Dock’s 1.8% annualized revenue growth over the last five years was sluggish. This subpar performance raises concerns about the company’s ability to deliver consistent sales growth in the future.
However, within the industrials sector, a half-decade historical view may miss industry trends or catalysts that can significantly impact a company’s performance. Great Lakes Dredge & Dock’s annualized revenue growth of 14.8% over the last two years is above its five-year trend, indicating that demand for the company’s services has accelerated recently.
Quarterly Revenue and Year-On-Year Growth
This quarter, Great Lakes Dredge & Dock reported robust year-on-year revenue growth of 22.3%, with sales totaling $242.9 million. This result exceeded Wall Street estimates by 17.5%. The company’s ability to generate significant revenue growth in a challenging market environment is noteworthy.
Looking ahead, sell-side analysts expect revenue to decline by 3.1% over the next 12 months, which suggests that the company’s products and services will face some demand challenges. This forecast does not inspire confidence and raises questions about Great Lakes Dredge & Dock’s ability to maintain its recent growth momentum.
Operating Margin
Operating margin is a key measure of profitability, providing insight into a company’s efficiency in managing its cost base. Great Lakes Dredge & Dock has done an admirable job in this regard, with an average operating margin of 8% over the last five years. This performance surpasses that of the broader industrials sector.
Analyzing the trend in its profitability, Great Lakes Dredge & Dock’s operating margin rose by 3 percentage points over the last five years, primarily driven by sales growth and increased efficiency. This expansion in operating leverage is a positive development for the company.
In Q1 CY2025, Great Lakes Dredge & Dock generated an operating profit margin of 20.6%, up 4.7 percentage points year on year. The primary driver behind this increase was the expansion of its gross margin, which gave the company greater efficiency in managing its cost base.
Earnings Per Share (EPS)
Revenue trends explain a company’s historical growth, but EPS provides insight into the profitability of that growth. Great Lakes Dredge & Dock’s flat EPS over the last five years was below its 1.8% annualized revenue growth. However, its operating margin expanded during this time, indicating that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.
A closer examination of Great Lakes Dredge & Dock’s EPS reveals that it has diluted its shareholders by growing its share count by 4.1%. This dilution overshadowed its increased operating efficiency and led to lower per-share earnings. Taxes and interest expenses can also impact EPS, but they do not reveal as much about a company’s fundamental performance.
In contrast, Great Lakes Dredge & Dock’s two-year annual EPS growth of 84.3% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
Q1 CY2025 Highlights
Great Lakes Dredge & Dock reported robust year-on-year revenue growth of 22.3%, exceeding Wall Street estimates by 17.5%. Its GAAP profit of $0.49 per share was 86.7% above analysts’ consensus estimates. The company’s operating margin rose to 20.6%, up from 15.8% in the same quarter last year.
Key Takeaways
We were impressed by how significantly Great Lakes Dredge & Dock blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. However, one quarter does not necessarily make a stock a buy. When making investment decisions, it’s essential to consider its valuation, business qualities, as well as what has happened in the latest quarter.
Conclusion
In conclusion, Great Lakes Dredge & Dock (NASDAQ:GLDD) delivered impressive Q1 results, exceeding Wall Street’s revenue expectations and reporting significant year-on-year growth. While this performance is noteworthy, investors should exercise caution when considering investment decisions based on a single quarter’s results. A comprehensive analysis of the company’s valuation, business qualities, and recent performance is essential to making informed investment decisions.