Imperial Capital Downgrades Great Lakes Dredge & Dock To In Line

Imperial Capital has downgraded Great Lakes Dredge & Dock Corporation GLDD to In Line from Outperform as it awaits evidence of improvement in its E&I segment.

Great Lakes reported second-quarter adjusted EBITDA of $18.3 million, slightly below Imperial's $19.8 million estimate and the consensus of $21.7 million. Revenue fell 19.5 percent to $192.2 million.

Great Lakes also concluded the strategic review it had initiated last fall and will essentially continue to execute on its existing strategy, with the goal of deploying its new ATB hopper dredge in early FY17. Furthermore, the company should turn around its E&I segment, with a more refined focus.

Related Link: Great Lakes Concludes Strategic Review With Greenhill & Co.

"Although we think this strategy makes sense under the circumstances, we await greater evidence of success with the turnaround of E&I (which continues to post operating losses), and/or the appointment of a new CEO, before becoming more confident in the outlook.

"Accordingly, we lower our rating to In-Line from Outperform," analyst Scott Levine wrote in a note.

Levine cut his FY16–17 EBITDA estimates to $76 million from $81million and $88 million from $102 million, respectively, on lower revenue in dredging, and to factor in the pending sale of the services portion of E&I.

The analyst also slashed his price target to $4 from $5.50; the revised price target is 7 percent above recent levels.

Shares of Great Lakes closed Friday's regular trading session at $3.73.

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