Granite Construction (GVA) Q3 2026 Earnings Report

The call was strongly positive. Granite reported record revenue, adjusted EBITDA, gross profit and CAP; expanded Construction margins; generated higher operating cash flow; raised the low end of 2026 revenue guidance; and outlined substantial federal, rail, mission-critical and Materials growth opportunities. The primary challenges were lower Materials margins from higher energy costs, a delay in tactical infrastructure project completion, uncertainty around transportation reauthorization and charges associated with the convertible note redemption. These lowlights were outweighed by the company's strong quarterly execution, improved outlook and long-term growth targets.

Granite is targeting organic revenue CAGR of 10% to 12% through 2029, with future M&A expected to be additive, an adjusted EBITDA margin of 14% to 16%, SG&A of approximately 7.5% of revenue, operating cash flow of approximately 13% of revenue, CapEx of approximately 3% of revenue and free cash flow of approximately 10% of revenue, while maintaining a long-term net leverage target of approximately 2.5x; core transportation is expected to grow in the mid-single digits through 2029, federal work is expected to represent approximately 15% of Construction segment revenue this year, rail could be closer to 5% in 2027 and pushing up closer to 10% of Construction segment revenue by 2028, and mission-critical infrastructure revenue can grow to at least 10% of Construction segment revenue over the next several years. For 2026, revenue guidance is $5.4 billion to $5.5 billion, with the revised range reflecting approximately 15% organic growth and approximately 9% growth from acquired businesses at the midpoint, operating cash flow is expected to be approximately 11% of revenue, and all other 2026 guidance assumptions are maintained; 2027 organic revenue growth is now expected at 10% to 12%. The company expects continued 50 basis point improvement each year over the next 3 years in both Construction and Materials gross profit margins, approximately 45% of eligible aggregate facilities to be automated by the end of 2026, approximately $1 per ton of benefit from automation investments, 2 or 3 more deals completed this year with total spend up to about $750 million if all 3 deals get across the finish line, year-end CAP burn of somewhere between 40% to 50%, or somewhere maybe 45% to 50%, next year’s aggregate price increases at kind of that mid -- a little bit higher price increases, asphalt pricing at low single digit, and volume in the upward kind of slightly upwards.