Granite Construction (GVA): Strategic Project Wins and Operational Excellence Fuel Near-Term Growth

Granite Construction (NYSE: GVA) stands at the forefront of the U.S. infrastructure renaissance, leveraging strategic project wins and operational discipline to drive growth and valuation upside. With a robust pipeline of high-margin, federally funded projects and a vertically integrated model that mitigates risks, the company is positioned to capitalize on the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) tailwinds. Here's why investors should take notice.

Key Project Wins: Catalysts for Growth

Granite's recent wins in 2024–2025 underscore its ability to secure large-scale, long-duration contracts aligned with federal and state priorities. Let's break down three standout projects:

1. Utah's $111M I-215/SR-201 Rehabilitation

This project, set to begin in August 2025, involves rehabilitating 3 miles of highway and 22 bridges in Salt Lake City. Key details include:
- Scope: Rubblization of existing concrete pavement, overlay with 175,000 tons of asphalt, and bridge deck replacements using hydro-demolition.
- Funding: 100% publicly funded by Utah DOT and federal sources.
- Strategic Impact: The project maintains Granite's paving crews through 2026 and leverages its Walker Hot Plant for asphalt supply, reducing material costs and ensuring quality control.

2. San Francisco International Airport's $115M Runway Rehabilitation

As Construction Manager/General Contractor for SFO's Runway 1R-19L project, Granite will:
- Modernize runway infrastructure, including lighting, drainage, and striping.
- Supply 185,000 tons of asphalt via its Santa Clara facility, showcasing self-performance capabilities.
- Execute the work while minimizing airport disruptions—a critical test of operational expertise.

3. Southern Nevada Water Infrastructure (Horizon Lateral Program)

Granite's joint venture with Contri Construction secured a $240M preconstruction contract for Nevada's Horizon Lateral Program:
- Scope: A 30-million-gallon-per-day pumping station and 21,000-foot pipeline to address water scarcity.
- Funding: 60% backed by IIJA funds, with construction slated for early 2027.
- Significance: Positions Granite as a leader in water infrastructure, a key IIJA priority.

Operational Efficiency: The Bedrock of Margin Resilience

Granite's success hinges on its vertically integrated model and execution excellence:
- Material Control: Self-supply of asphalt (via Walker and Santa Clara plants) reduces reliance on third-party vendors, shielding margins from commodity price swings.
- Execution Metrics: A 93% on-time completion rate over five years reflects disciplined project management. For instance, the Utah I-215 project's phased construction plan minimizes traffic disruptions while maximizing efficiency.
- Diversification: A $6.3 billion backlog (up 12% YoY) spans roads, bridges, airports, and water projects, reducing exposure to sector-specific volatility.

Financial Strength and Valuation Upside

Granite's financials reflect its strategic execution:
- Backlog Growth: Public-sector projects account for ~$2.5 billion of the backlog, with 75% of revenue tied to stable, long-term contracts.
- Profitability: Adjusted EBITDA rose to $402 million in 2024 (+43% YoY), driven by margin expansion in the Construction segment (13.9% gross margin in Q1 2025).
- Valuation: At $85 per share, Granite trades at a ~27% discount to DA Davidson's $108 price target, which factors in CAP-driven visibility and margin resilience.

Risks and Mitigation

• Commodity Costs: Rising asphalt and diesel prices pose a risk, but Granite's fixed-price contracts and self-performance model mitigate this.
• Funding Delays: While IIJA funds are robust, bureaucratic hurdles could delay projects. Granite's diversified backlog and early permitting (e.g., the Utah project) help offset this risk.
• Leadership Transition: COO James Radich's retirement introduces some uncertainty, though his consulting role ensures continuity.

Investment Thesis: Buy the Infrastructure Boom

Granite Construction is a prime beneficiary of the IIJA, with a pipeline of projects that align perfectly with federal priorities. Its operational strengths—vertical integration, execution excellence, and backlog diversification—position it to deliver steady growth.

Recommendation:
- Buy: With a CAP backlog of $6.3 billion and a price target implying 27% upside, GVA is a compelling buy for investors seeking exposure to infrastructure growth.
- Hold: For risk-averse investors, await near-term catalysts like Q2 CAP disclosures or IIJA funding clarity.

The road ahead is paved with opportunity for Granite—a company that's not just building infrastructure but also building shareholder value.

Analysis as of July 14, 2025.