During Granite Construction's fourth-quarter earnings call, CEO Kyle Larkin expressed confidence in continued support for the construction industry from the Infrastructure Investment and Jobs Act (IIJA), despite potential challenges such as inflation. The California-based roadbuilder reported a strong market outlook, largely driven by public funding.

Granite Construction, which generates a significant portion of its revenue from public sector projects, is not overly concerned by the political climate in Washington, even in light of the Trump administration's decision to freeze government grant disbursements. Larkin shared his optimism during the Feb. 13 call, highlighting that funding from the IIJA would continue beyond its scheduled sunset in 2026.

“We’re following the changes coming out of Washington and believe that there is tremendous support to maintain and improve our nation’s highways, roads, bridges, ports and airports,” Larkin stated. “We expect the current level of funding for this critical infrastructure to continue well beyond the IIJA.”

Larkin went on to emphasize that most of the IIJA funds remain to be spent, and he expects them to support the industry well into the future. “We believe the infrastructure bill will continue to support our industry for many years to come, with the majority of funds remaining to be spent when the bill terminates in 2026,” he said.

Granite’s Financial Growth and Market Outlook

Granite Construction reported impressive financial results for the fourth quarter of 2024, with net income rising 60% to $41.5 million compared to the same period in 2023. For the full year, profits nearly tripled, reaching $126.3 million. The company also posted a 14% revenue increase, reaching $4 billion for the year.

However, the company did report a decline in its backlog, which stood at $5.3 billion at the end of 2024, down from $5.6 billion in the previous quarter. Despite this, Larkin noted that the bidding environment remained strong, with Granite submitting the low bid on $450 million worth of new projects during the quarter. The firm expects to recognize this backlog in Q1 and Q2 of 2025.

“Obviously, CAP can come up and down a little bit based on some of these best value projects, when it can be lumpy,” Larkin explained. “But over the long haul, we believe we’re going to continue to build CAP.”

Strong Market Confidence Amid Inflation Concerns

Larkin credited the current market strength to the continued support from federal infrastructure spending, particularly the IIJA. He described the market as the strongest he has encountered in his career, excluding the brief housing bubble. State transportation budgets are at near-record levels, thanks in part to the IIJA, with California’s proposed 2025-2026 state DOT budget seeing a 9% increase to $9.8 billion.

“We continue to experience the strongest market that I’ve seen throughout my career, excluding only the short-lived housing bubble,” Larkin remarked. “State transportation budgets are near record levels across our footprint. These state budgets are supported by the federal infrastructure bill, or IIJA.”

Larkin’s one concern was the potential for rising inflation, especially amid the Trump administration’s tariffs on foreign building materials. However, he reassured investors that Granite is well-positioned to manage any cost increases by focusing on projects that have already been designed.

“Right now, we anticipate being closer to that 3%,” Larkin said, referring to inflation expectations. “We feel really good about our ability to mitigate that risk, but we do expect inflation to go up a little bit this year.”

Originally reported by Joe Bousquin in Construction Dive.