Why Granite Construction (GVA) Is the Best Engineering Stock to Buy for 2025

Ever since the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) were passed, a big question has loomed over the potential opportunities for engineering and construction companies: Which one is the best investment for the coming years? The answer: Granite Construction Incorporated (GVA), write our analysts. Here's why:

Granite Construction has shown remarkable earnings growth over the past four years, with a compounded annual growth rate (CAGR) of 31.7% from 2020 to 2024. This growth rate is significantly higher than the broader industrials sector, indicating that GVA's earnings have been expanding at a faster pace than its peers. To illustrate this point, let's compare GVA's EPS growth with that of two other companies in the engineering and construction sector: Caterpillar Inc. (CAT) and Deere & Company (DE).

* GVA's EPS CAGR from 2020 to 2024: 31.7%
* CAT's EPS CAGR from 2020 to 2024: 15.2% (Source: Yahoo Finance)
* DE's EPS CAGR from 2020 to 2024: 12.5% (Source: Yahoo Finance)

As we can see, GVA's EPS growth rate is significantly higher than that of CAT and DE, suggesting that GVA's earnings growth trajectory has been more robust compared to its peers in the engineering and construction sector.

One of the key factors driving GVA's growth is its strategic acquisitions, which have expanded the company's market presence and secured new projects. In 2024, GVA acquired Dickerson & Bowen, Inc., which contributed to the company's revenue growth and increased its committed and awarded projects (CAP) pipeline. This acquisition is expected to continue driving GVA's future earnings and growth prospects, as the company continues to expand its market presence and secure new projects.

Granite Construction's CAP growth in 2024 significantly influences its potential for increased revenue and earnings in 2025. As of the third quarter of 2024, GVA's CAP reached a record high of $5.6 billion, a sequential increase of $44 million and a year-over-year increase of $35 million. This growth in CAP indicates a strong pipeline of projects that GVA has secured, which is expected to translate into increased revenue and earnings in the coming year.

Moreover, GVA's strong financial performance in 2024 supports its potential for increased earnings in 2025. The company reported a 14% year-over-year increase in revenue to $1.3 billion in the third quarter of 2024, with both the Construction and Materials segments contributing to this growth. This revenue growth, coupled with the company's CAP growth, suggests that GVA is well-positioned to generate increased revenue and earnings in 2025.

In addition, GVA's CAP growth is expected to drive margin expansion and operating cash flow growth, as the company targets a 7% operating cash flow margin for the year. This further supports the company's potential for increased earnings in 2025.

In conclusion, Granite Construction's remarkable earnings growth, strategic acquisitions, and strong financial performance make it the best engineering stock to buy for 2025. The company's robust market conditions, strategic initiatives, and strong financial performance all contribute to its potential for increased revenue and earnings in the coming year. Investors looking for a solid engineering stock to add to their portfolios should consider Granite Construction Incorporated (GVA).