Orion Needs To Leverage Infrastructure Opportunities To Drive More Consistent Results

Consistent performance has been elusive for Orion Group (NYSE:ORN), even though the company has hard-to-match capabilities in marine construction and a solid concrete construction operation in Texas. To some extent, this is not all Orion's fault, as a lot of the company's business depends upon government budgeting and allocation decisions and the company is vulnerable to very competitive (if not irrational) bidding behavior from its rivals. While the shares have done quite well over the past year compared to other construction and dredging operators like Great Lakes Dredge & Dock (NASDAQ:GLDD) and Granite Construction (NYSE:GVA), the five-year performance record is not especially strong.

Orion looks undervalued, but that undervaluation comes with the underlying cost of a lot of risk and uncertainty. I expect a supportive funding environment for the maintenance of commercial waterways, as well as coastal restoration projects, and I think growth in the cruise sector and terminal demand will support the construction operations, while Texas remains a growth market for the concrete construction business. That said, winning and executing bids should not be taken for granted and this isn't a "widows and orphans" type of opportunity.

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Orion Needs To Leverage Infrastructure Opportunities To Drive More Consistent Results

Seeking Alpha: Great Lakes Dredge And Dock Needs To Execute On Upcoming Opportunities

I'm skeptical of businesses that struggle (or fail) to earn their cost of capital over a sustained period of time. That makes Great Lakes Dredge & Dock (GLDD) a more challenging company for me. On one hand, I like the company's strong share in its core dredging operations, and I believe there will be significant port expansion projects in the years to come. Yet, even with over 100 years of experience, the company's wobbly cash flow, returns on capital, and book value growth doesn't give me a lot of confidence, and the company's quarterly reports have had a flair for the dramatic lately.

These shares have rallied a third since their lows of the fall, but I could see these shares heading higher as the company logs more port, waterway, and beach work. I'd be careful to make this relationship a casual one, though, and not expect to hold for long stretches of time as the underlying performance just doesn't seem to merit it.

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Great Lakes Dredge And Dock Needs To Execute On Upcoming Opportunities