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Great Lakes Dredge & Dock Corporation (GLDD): Why This Company’s Dirty Job Could Send Its Stock Soaring

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I love most aquatic sports. From fishing and kayaking to powerboating and waterskiing, if it’s warm out, I want to be near or on the water.

I grew up near several major rivers where I often fished and boated as a youngster. Although these rivers were hundreds of yards wide, they were usually shallow. They were constantly becoming silted in from runoff, debris and assorted other factors. The same thing occurred in local reservoirs, where the water got continuously shallower as mud and silt piled up against the dam.

If you have ever stepped into this muddy, silt-filled mess when boating or fishing, then you know it’s pretty disgusting. Not only is the silting of rivers and reservoirs a real issue for recreational users of waterways, but it can impede crucial transportation and navigation routes.

It’s a problem begging for a solution — and in a twist of fate, I discovered a company that provides one.

Several weeks ago, when researching the SPDR Gold Trust (ETF) (NYSEARCA:GLD), I inadvertently added an extra “D” to the SPDR Gold Trust (ETF) (NYSEARCA:GLD) ticker symbol. What I serendipitously fell into reminded me of the waterway silting issue.

Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD)This company, Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), provides a solution to the silting problem, without even mentioning its other diversified problem-solving businesses. I decided to take a closer look at this company as a potential investment.

Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is a 122-year-old U.S.-based dredging company. Dredging is the process used to remove the silt and muck from the bottom of waterways to maintain a navigable depth — think of backhoes that can dig underwater — and is the only practical solution to the problem of silting. The company owns the largest fleet of dredging vessels in the industry, with more than 200 boats.

Although based in the United States, Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) has a strong international presence. The company is also involved in other businesses beyond dredging. It provides demolition services in the Northeast U.S., holds a 50% share of a New Jersey-based marine sand-mining company and even owns a 50% share in an environmental services company focusing on remediating polluted swamp lands.

Not only does Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) save inland waterways, but the company is also involved in beach replenishment and protection. This often involves pumping in sand from offshore locations to rebuild beaches lost to storms and steady erosion.

The company recently won a contract of more than $100 million from the U.S. Army Corps of Engineers to deepen the Miami Harbor. Dredging is expected to start in the fourth quarter. The project will begin by digging out the offshore entrance to the port with additional work to potentially be awarded in 2014.

While the company’s dredging division is posting solid results — not to mention winning more than 50% of the U.S. market — the demolition division is dragging on overall performance. Digging into the details, Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD)’ revenue increased more than 20% in the first quarter, to nearly $190 million. In addition, gross profit margin rose slightly to 13.7% from 12.9% a year ago. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew 23% to just over $18 million, from just under $15 million in 2012.

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