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In a bid to vertically integrate specialty infrastructure services in the Southeast region, Sterling Construction Company, Inc. (STRL - Free Report) has acquired Kimes & Stone for $7.6-million cash.
Kimes is a diversified services provider. Its work includes soil stabilization for site development on e-commerce projects such as large fulfillment and distribution centers and data centers as well as soil stabilization for roadways and manufacturing plant construction. Sterling’s site development business has been its major customer over the past several years.
The recent buyout includes a fleet of soil stabilization equipment, working capital, and an experienced and highly effective management team and workforce. The acquisition will enhance capacity, assets, and people; broaden the range of high-quality private and public customers in the rapidly growing end markets; and advance e-infrastructure service offering to key blue-chip customers in the region.
Sterling’s chief executive officer, Joe Cutillo, said, "Since our purchase of Plateau a little more than two years ago, we have seen a significant increase in demand for the superior performance of soil cement stabilization as opposed to the stone stabilization method. Kimes’ strong culture, equipment fleet, and solid competencies in soil cement stabilization will allow us to rapidly expand these capabilities into our existing and future geographic footprint."
Acquisition Strategy Bodes Well
In 2016, Sterling implemented a growth and expansion strategy through buyouts. The buyouts help the company to broaden the types of projects it executes and enhance market reach. Sterling primarily targets those companies for acquisition that have gross margins of 15% or more. Earlier, it completed Tealstone and Plateau acquisitions in 2017 and 2019, respectively.
Image Source: Zacks Investment Research
On Oct 2, 2019, Sterling acquired all issued and outstanding shares of LK Gregory Construction, Inc. and Plateau Excavation, Inc. as well as all issued and outstanding equity interests in DeWitt Excavation, LLC (collectively Plateau). Plateau provides engineering and executing site development services to general contractors and developers engaged in construction and engineering services relating thereto.
On Apr 3, 2017, it completed the buyout of all issued and outstanding shares of Tealstone Commercial, Inc., and Tealstone Residential Concrete, Inc. (collectively Tealstone). Tealstone mainly focuses on concrete construction of residential foundations, parking structures, elevated slabs, and other concrete work for leading home builders, multi-family developers, and general contractors in both residential and commercial markets.
Sterling’s shares have gained 43.3% so far this year compared with the Zacks Building Products - Heavy Construction industry’s 27.8% rally. Also, earnings estimates for 2021 and 2022 have moved up 7.5% and 7.8% over the past 60 days, indicating 41.5% and 9.5% year-over-year growth, respectively. The company is benefiting from a solid acquisition strategy and strong project execution.
Other Top-Ranked Stocks in Broader Construction Sector
Boise, ID-based Boise Cascade Company (BCC - Free Report) — which makes wood products and distributes building materials in the United States as well as Canada — is aided by factors like favorable commodity wood products, pricing, and robust construction activity.
Boise Cascade, a Zacks Rank #1 stock, is expected to witness 159.1% growth in 2021 earnings. Shares of the company have jumped 60.5% in the year-to-date period.
Louisiana-Pacific Corporation (LPX - Free Report) is a leading manufacturer of sustainable, quality engineered wood building materials, structural framing products, and exterior siding for use in residential, industrial, and light commercial construction. It operates through four segments: Siding, Oriented Strand Board, Engineered Wood Products and South America.
Louisiana-Pacific’s shares have appreciated 114.7% in the year-to-date period. LPX has an expected earnings growth rate of 213.2% for the current year.
Weyerhaeuser Company (WY - Free Report) is one of the leading U.S. forest product companies. The company has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.
Weyerhaeuser has an expected earnings growth rate of 161.2% for the current year. Shares of the company have jumped 22.2% in the year-to-date period.
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Sterling (STRL) Acquires Kimes, Expands Presence & Offerings
In a bid to vertically integrate specialty infrastructure services in the Southeast region, Sterling Construction Company, Inc. (STRL - Free Report) has acquired Kimes & Stone for $7.6-million cash.
Kimes is a diversified services provider. Its work includes soil stabilization for site development on e-commerce projects such as large fulfillment and distribution centers and data centers as well as soil stabilization for roadways and manufacturing plant construction. Sterling’s site development business has been its major customer over the past several years.
The recent buyout includes a fleet of soil stabilization equipment, working capital, and an experienced and highly effective management team and workforce. The acquisition will enhance capacity, assets, and people; broaden the range of high-quality private and public customers in the rapidly growing end markets; and advance e-infrastructure service offering to key blue-chip customers in the region.
Sterling’s chief executive officer, Joe Cutillo, said, "Since our purchase of Plateau a little more than two years ago, we have seen a significant increase in demand for the superior performance of soil cement stabilization as opposed to the stone stabilization method. Kimes’ strong culture, equipment fleet, and solid competencies in soil cement stabilization will allow us to rapidly expand these capabilities into our existing and future geographic footprint."
Acquisition Strategy Bodes Well
In 2016, Sterling implemented a growth and expansion strategy through buyouts. The buyouts help the company to broaden the types of projects it executes and enhance market reach. Sterling primarily targets those companies for acquisition that have gross margins of 15% or more. Earlier, it completed Tealstone and Plateau acquisitions in 2017 and 2019, respectively.
On Oct 2, 2019, Sterling acquired all issued and outstanding shares of LK Gregory Construction, Inc. and Plateau Excavation, Inc. as well as all issued and outstanding equity interests in DeWitt Excavation, LLC (collectively Plateau). Plateau provides engineering and executing site development services to general contractors and developers engaged in construction and engineering services relating thereto.
On Apr 3, 2017, it completed the buyout of all issued and outstanding shares of Tealstone Commercial, Inc., and Tealstone Residential Concrete, Inc. (collectively Tealstone). Tealstone mainly focuses on concrete construction of residential foundations, parking structures, elevated slabs, and other concrete work for leading home builders, multi-family developers, and general contractors in both residential and commercial markets.
Sterling’s shares have gained 43.3% so far this year compared with the Zacks Building Products - Heavy Construction industry’s 27.8% rally. Also, earnings estimates for 2021 and 2022 have moved up 7.5% and 7.8% over the past 60 days, indicating 41.5% and 9.5% year-over-year growth, respectively. The company is benefiting from a solid acquisition strategy and strong project execution.
Zacks Rank
UFP Industries currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Top-Ranked Stocks in Broader Construction Sector
Boise, ID-based Boise Cascade Company (BCC - Free Report) — which makes wood products and distributes building materials in the United States as well as Canada — is aided by factors like favorable commodity wood products, pricing, and robust construction activity.
Boise Cascade, a Zacks Rank #1 stock, is expected to witness 159.1% growth in 2021 earnings. Shares of the company have jumped 60.5% in the year-to-date period.
Louisiana-Pacific Corporation (LPX - Free Report) is a leading manufacturer of sustainable, quality engineered wood building materials, structural framing products, and exterior siding for use in residential, industrial, and light commercial construction. It operates through four segments: Siding, Oriented Strand Board, Engineered Wood Products and South America.
Louisiana-Pacific’s shares have appreciated 114.7% in the year-to-date period. LPX has an expected earnings growth rate of 213.2% for the current year.
Weyerhaeuser Company (WY - Free Report) is one of the leading U.S. forest product companies. The company has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.
Weyerhaeuser has an expected earnings growth rate of 161.2% for the current year. Shares of the company have jumped 22.2% in the year-to-date period.