Back to top

Image: Bigstock

Factors Setting the Tone for Sterling's (STRL) Q4 Earnings

Read MoreHide Full Article

Sterling Construction Company, Inc. (STRL - Free Report) is slated to report fourth-quarter 2021 results on Feb 28, after the closing bell.

In the last reported quarter, adjusted earnings surpassed the Zacks Consensus Estimate by 28.6% and revenues topped the same by 13.9%. On a year-over-year basis, earnings improved 33.3% driven by a diversified business and focus on higher-margin, reduced interest expense and a lower income tax expense. Further, revenues were up 20.8% year over year.

This mechanical and electrical construction service provider’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters and missed on another occasion, with the average surprise being 34.6%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has been unchanged at 37 cents per share over the past 30 days. The estimated figure indicates an 85% increase from the year-ago earnings of 20 cents per share. The consensus mark for revenues is $340 million, suggesting a 2.1% decline from the year-earlier reported figure.

Factors to Note

Focus on higher-margin and lower-risk projects and aligning business with long-term growth markets such as e-infrastructure and residential is expected to have aided Sterling in the fourth quarter of 2021. Its diversified portfolio also added to the tailwinds. STRL has been efficiently executing a robust pipeline of projects for large high-profile customers who are building new distribution centers, data centers and warehouses.

Yet, seasonal slowdown in the residential market, risk of material delays, supply-chain disruptions and weather might have weighed on its performance.

The Heavy Civil business segment, contributing 54% to total revenues, is likely to have gained from the company’s focus on more aviation and alternative delivery highway projects with higher margins and lower risks rather than low-bid heavy highway projects.

Its Residential segment, accounting for 14% of total revenues, is likely to have witnessed strong demand and productivity trends in the quarter to be reported. Yet, the segment has been experiencing supply-chain issues, specifically relating to the cost of concrete, lumber and steel, due to which management announced multiple price increases during the quarter. These headwinds might put pressure on fourth-quarter results.

The Specialty Services segment, accounting for 32% of total revenues, has been gaining strength from geographic expansion efforts that enabled the company to gain new customers. Yet, inflation, supply chain pressures and weather-related challenges are likely to have reflected on fourth-quarter margins.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for Sterling this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here as you will see below.

Earnings ESP: It has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sterling currently carries a Zacks Rank #1.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Construction Releases

EMCOR Group, Inc. (EME - Free Report) reported mixed results for fourth-quarter 2021. Adjusted earnings lagged the Zacks Consensus Estimate but revenues surpassed the same. On a year-over-year basis, both the metrics improved, thanks to robust demand for its services.

EMCOR expects earnings per share within $7.15-$7.85 and revenues between $10.4 billion and $10.7 billion for 2022.

Gibraltar Industries, Inc. (ROCK - Free Report) reported lackluster earnings for fourth-quarter 2021. Earnings missed the Zacks Consensus Estimate and declined on a year-over-year basis due to low margins in the Renewables segment. Margins were affected by increased field costs owing to supply-chain disruptions and intense inflation on structural steel in solar canopy racking projects.

Gibraltar’s net sales surpassed the consensus mark and increased from the year-ago level.

Armstrong World Industries, Inc. (AWI - Free Report) reported solid results for fourth-quarter 2021. The top and bottom lines surpassed the Zacks Consensus Estimate as well as increased on a year-over-year basis. The improvement was attributed to a favorable average unit value and benefits from the acquisitions of Turf, Moz, and Arktura in 2020.

Armstrong World noted that the resurgence of the pandemic in certain markets and the global supply chain and labor disruptions resulted in extended project timelines.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.