Analyst Sticks Neck Out On Great Lakes Dredge & Dock, Maintains Outperform

• Great Lakes Dredge & Dock Corporation GLDD shares have plunged 50 percent year-to-date, having declined steadily since January.
• Imperial Capital’s Scott Levine maintained an Outperform rating on the company, with a price target of $8.50.
• With continued woes at the E&R segment, the company has withdrawn its FY15 guidance and initiated a strategic review, Levine noted.

Analyst Scott Levine believes that Great Lakes Dredge & Dock is poised to benefit from a “multi-year uplift in marine construction activity,” in view of its robust dredging capabilities. He added, however, that there is lack of clarity on the prospects of the company’s Environmental & Remediation [E&R] segment.
Great Lakes Dredge & Dock had withdrawn its financial guidance for FY15, citing continued weakness in the E&R segment. The company indicated that the segment was witnessing project challenges as well as softer-than-anticipated bookings.

The E&R segment has been recording losses since the acquisition of Magnus Pacific in November 2014. The withdrawal of guidance by the company could result in increased investor skepticism around the E&R business, Levine said.

Great Lakes Dredge & Dock also announced a strategic review by its board to enhance shareholder value, without providing any indication of the timeline or potential outcomes of this review.

Levine believes that the review would focus on the E&R segment and could include capital allocation, although “all options are likely on the table.”

The EPS estimates for 2015 and 2016 have been reduced from $0.13 to ($0.02) and from $0.36 to $0.28, respectively.