Head-To-Head Analysis: Granite Construction (NYSE:GVA) and KBR (KBR)

Granite Construction (NYSE: GVA) and KBR (NYSE:KBR) are both mid-cap construction companies, but which is the better investment? We will compare the two businesses based on the strength of their analyst recommendations, risk, dividends, profitabiliy, earnings, institutional ownership and valuation.

Dividends

Granite Construction pays an annual dividend of $0.52 per share and has a dividend yield of 1.0%. KBR pays an annual dividend of $0.32 per share and has a dividend yield of 2.1%. Granite Construction pays out 48.6% of its earnings in the form of a dividend. KBR pays out -68.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. KBR is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility & Risk

Granite Construction has a beta of 1.2, suggesting that its stock price is 20% more volatile than the S&P 500. Comparatively, KBR has a beta of 1.11, suggesting that its stock price is 11% more volatile than the S&P 500.

Institutional and Insider Ownership

93.3% of Granite Construction shares are owned by institutional investors. Comparatively, 99.7% of KBR shares are owned by institutional investors. 1.3% of Granite Construction shares are owned by company insiders. Comparatively, 0.6% of KBR shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Granite Construction and KBR’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Granite Construction $2.54 billion 0.79 $127.54 million $1.07 46.98
KBR $4.38 billion 0.50 $15.00 million ($0.47) -32.51

Granite Construction has higher revenue, but lower earnings than KBR. KBR is trading at a lower price-to-earnings ratio than Granite Construction, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings for Granite Construction and KBR, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Granite Construction 0 2 7 0 2.78
KBR 1 2 7 0 2.60

Granite Construction currently has a consensus target price of $61.25, suggesting a potential upside of 21.84%. KBR has a consensus target price of $18.50, suggesting a potential upside of 21.07%. Given Granite Construction’s stronger consensus rating and higher probable upside, analysts clearly believe Granite Construction is more favorable than KBR.

Profitability

This table compares Granite Construction and KBR’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Granite Construction 1.71% 4.85% 2.53%
KBR -1.51% 4.79% 1.15%

Summary

Granite Construction beats KBR on 10 of the 14 factors compared between the two stocks.

About Granite Construction

Granite Construction Incorporated is a heavy civil contractor and construction materials producer in the United States. The Company operates through three segments: Construction, Large Project Construction and Construction Materials. The Company operates across the nation, serving both public and private sector clients. Within the public sector, it concentrates on heavy-civil infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, trenchless and underground utilities, power-related facilities, water and wastewater facilities, utilities, tunnels, dams and other infrastructure-related projects. Within the private sector, the Company offers site preparation and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities, as well as provides construction management professional services.

About KBR

KBR, Inc. is a provider of professional services and technologies across the asset and program life-cycle within the government services and hydrocarbons industries. The Company operates through business segments, including Technology & Consulting (T&C), Engineering & Construction (E&C), Government Services (GS), Non-strategic Business and Other. The T&C business segment combines KBR technologies, knowledge-based services and its three specialty consulting brands, Granherne, Energo and GVA, under a single customer-facing global business. The E&C business segment provides project and program delivery solution across the globe. The GS business segment provides life-cycle support solutions to defense, space, aviation and other programs and missions for government agencies in the United States, the United Kingdom and Australia. Its solutions include engineering services, mission and logistics support solutions, consulting, procurement, construction management and other support services.

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