HARTFORD, Conn. (AP) ¿ An analyst downgraded Granite Construction Inc. Thursday, saying the contractor and producer of construction materials could feel the impact of reduced spending on public works in the next six months to a year.
Goldman Sachs analyst Joe Ritchie downgraded the Watsonville, Calif., company to "Neutral" from "Buy."
"While we continue to like the infrastructure theme longer-term, we believe domestic infrastructure will underperform energy infrastructure over the next six to 12 months," he said in a client note.
Ritchie upgraded Granite Construction to "Buy" in late May, but said Thursday he underestimated the extent of California's state funding problems. He also said he believed much of the bad fiscal news was already priced into the stock.However, stocks related to companies involved in energy projects have since outperformed and he believes this will continue in the next six to 12 months. Ritchie said he is positive on the long-term growth prospects for Granite Construction. Its shares will benefit from federal stimulus spending and a pickup in residential construction, particularly in California, he said. Ritchie cut his estimate to $1.53 per share from $1.70 for this year, to $1.85 per share from $2.25 for 2010 and to $2.50 per share from $2.65 per share for 2011. Analysts surveyed by Thomson Reuters expect, on average, that Granite Construction will earn $1.77 per share this year, $1.95 per share for 2010 and $2.60 per share for 2011. Shares fell 50 cents to $28.64 in premarket trading.