Will Great Lakes' $1B Backlog Keep Margins Strong Through 2026?

Great Lakes Dredge & Dock Corporation GLDD enjoys a competitive advantage for large-scale capital and coastal protection projects due to the requirements of certain specifications that differ from maintenance dredging. As of March 31, 2025, the company’s substantial dredging backlog was $1 billion compared with $879.4 million as of last year’s first quarter. Notably, capital and coastal protection projects accounted for 95% of the dredging backlog. Furthermore, as of the same period, it also had an additional $265.3 million in low bids and options pending award.The numbers are in favor of Great Lakes mainly due to its resilience in executing large-scale projects, alongside the strong demand trends for coastal restoration projects. This type of project not only boosts the company’s revenue visibility but also fosters its margin growth. The primary reasons are that the projects are government-funded (the U.S. Army Corps of Engineers or FEMA-backed initiatives), which reduces payment failure risks, and are larger in scale with longer duration, ensuring efficient asset utilization.Adding to these tailwinds is GLDD’s ongoing new build program, which taps into modernizing its extensive fleet, essential for these large-scale projects. As of March 31, 2025, it had invested more than $500 million in this program. In 2025, the company expects to spend between approximately $140 million and $160 million, mainly on vessels in its new build program and maintenance capital expenditures. Despite the ongoing macro risks, in the first quarter of 2025, its gross margin expanded 570 basis points to 28.6% year over year.Backlog Trends of Other Heavy Construction FirmsFirms like Orion Group Holdings, Inc. ORN and Quanta Services, Inc. PWR are also banking on backlog growth due to strong public funding for infrastructure projects.Orion Group’s backlog strength is driven by strong demand for dredging projects (Marine segment), fostered by government funding. As of March 31, 2025, the company’s total backlog grew year over year by 11% to $839.7 million, with the Marine segment contributing 72.3% to the backlog. Amid a favorable market backdrop, Orion Group remains optimistic in its end markets and emerging opportunities in several marketplaces for its revenue visibility.Quanta is also benefiting from the favorable public infrastructure funding environment, mainly due to its involvement in the advancement and implementation of technology solutions throughout the entire decarbonization spectrum. As of the first quarter of 2025, Quanta had a total backlog of $35.25 billion, with a 12-month backlog of $19.42 billion, up year over year by 17.9% and 16.7%, respectively.GLDD Stock’s Price Performance & Valuation TrendShares of this dredging service provider have soared 52.8% in the past three months, significantly outperforming the Zacks Building Products - Heavy Construction industry, the broader Zacks Construction sector and the S&P 500 index.Image Source: Zacks Investment ResearchGLDD’s current valuation looks promising for investors. The stock is currently trading at a discount compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 12.52X.Image Source: Zacks Investment ResearchEPS Trend Favors GLDDGLDD’s earnings estimates for 2025 and 2026 have trended upward in the past 60 days by 34.8% to 93 cents per share and 11.8% to 95 cents per share, respectively. The estimated figures for 2025 and 2026 reflect 10.7% and 2.7% year-over-year growth, respectively.Earnings Estimate RevisionImage Source: Zacks Investment ResearchThe stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>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 Quanta Services, Inc. (PWR): Free Stock Analysis Report Orion Group Holdings, Inc. (ORN): Free Stock Analysis Report Great Lakes Dredge & Dock Corporation (GLDD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks