Econ- ya I went off a little on them on Q1 for the, uh, lack of building margins while hiring more peeps, giving them raises, and building backlog to historic highs ahead of time.
Guess they got the message but too bad they did the hiring and raises BEFORE the margin increases. Mngmnt mistake on their part plain and simple IMO. But, moving on...
That said, they didn't split out how much startup cost was involved in Q1 last Q (woulda been nice if they'd been better at telegraphing that in Q1 report commentary) and some lower margin earlier bid biz was getting churned thru in Q1 so the latter of those should be behind them and the continuing increase in capability down in Hopkins should bode well for being able to bid more work/better margin with more product going forward (breeeeeathe, long sentence LOL).
They work with some fairly big heavy civil companies already in Va and some of those companies also work down into the newer geographic footprint regions so I'm hopeful for a fairly smooth transition there. The facility has good overhead clearance so they should be able to expand product line (unlike in North Carolina where the facility is smallish and not enough overhead for some work).
Backlog burned down and it may tighten a little further next couple Qs but as previously mentioned, it's my opinion backlog will get to building again in 2017 and workloads may increase enough to raise pricing. At least SMID has the inaug contract and mentioned Q3 will be healthy too which gets them thru to 2017.
Should be a busy few years for many of these downtrodden infrastructure-intensive companies.
I like CUO better but this is also a core holding so was somewhat happy with their progress sequentially (margins still not where I'd like to see but getting better- I want to see COGS in the 70s% range).
All IMO. Good luck.
PS- new spending is going to have to get thru congress and we know what they've killed when it comes to incrastructure spend. But the jobs created are better paying and not service-side compared to many jobs available to less trained or educated work force IMO (part of the group left out of the little bit of recovery we've had) so maybe the branches will work together for a change. Maybe.
I don't mind stealing bread from the mouths of decadence... But I can't feed on the powerless when my cup's already overfilled.
-Temple of the Dog
