Sterling Infrastructure, Inc. (STRL Quick QuoteSTRL - Free Report) released its first-quarter 2025 earnings last Monday. The company started 2025 on a strong note with adjusted earnings per share (EPS) of $1.63, beating the consensus mark and reflecting 29% year-over-year growth. Adjusted EBITDA rose 31% to $80 million, driven by improved margins and disciplined project execution. Revenue reached $430.9 million, beating estimates and growing 7% (on a pro forma basis) despite a reported year-over-year decline due to a JV accounting change. Gross margin expanded 450 basis points to 22%, reflecting operational efficiencies and favorable project mix. Strong operating cash flow of $85 million and continued capital deployment, including the $25 million acquisition of Drake Concrete, underscore the company’s financial strength.

Sterling, a mid-cap company, has gained after its first-quarter 2025 results, rising 7.3% since its release on May 5. The STRL stock has outpaced the Zacks Engineering - R and D Services industry (up 1.8%) and the broader Zacks Construction sector (up 0.4%). The Zacks S&P 500 Composite has declined 0.8% in the same time frame. The STRL stock has a Momentum Score of B.

STRL stock is now trading at a 13.7% discount to its 52-week high of $206.07 and a premium of 90.1% to its 52-week low of $93.50.

STRL Share Price Performance

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Also, STRL is trading above its 200-day and 50-day simple moving averages (SMAs). STRL has also outperformed peer companies like Dycom Industries, Inc. (DY Quick QuoteDY - Free Report) , Construction Partners, Inc. (ROAD Quick QuoteROAD - Free Report) and Comfort Systems USA, Inc. (FIX Quick QuoteFIX - Free Report) , which have gained 4.3%, 6.9% and 0.7% during the same time frame, respectively.

Sterling Price Movement vs. 50-Day & 200-Day Moving Averages

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What’s Driving Sterling Stock Upward?

Solid Ongoing Growth in E-Infrastructure, Led by Data Centers

The primary engine behind Sterling’s performance was its E-Infrastructure Solutions segment, which recorded 18% revenue growth and a 61% jump in operating income in the first quarter. The data center market alone surged approximately 60% year over year and now constitutes more than 65% of the E-Infrastructure backlog. This spike is directly tied to the AI-driven explosion in computing demand, which requires high-capacity data centers with complex site development.

Sterling’s focus on mission-critical, large-scale projects gave it a competitive edge, with customers favoring its track record of delivering projects on or ahead of schedule. The company’s shift to higher-margin, technically sophisticated infrastructure sites, such as hyperscale data centers, allowed it to extract greater operating leverage and realize a 618 basis-point (bps) expansion in margins for the segment.

Backlog Momentum and Multiyear Visibility

The total backlog (i.e., Remaining Performance Obligations or RPOs) at the end of first-quarter 2025 stood at a record $2.13 billion, up 26% from 2024-end. Of this, E-Infrastructure accounted for $1.22 billion. Importantly, Sterling also reported $750 million in future phase opportunities, indicating strong continuity of project work across multi-phase developments. This combination provides Sterling with visibility into nearly $2 billion of future E-Infrastructure revenue, an unprecedented figure in the company’s history.

In Transportation Solutions, backlog also increased to $861 million, up 11% on a pro forma basis, suggesting ongoing strength in infrastructure spending and customer demand.

Project Mix Optimization and Margin Discipline

A central component of Sterling’s margin expansion strategy was its intentional shift in project mix. In Transportation Solutions, the company is reducing exposure to low-bid, heavy highway work—particularly in Texas—and reallocating resources toward high-value projects such as aviation, rail, and alternative delivery models. These segments offer more predictable cost profiles, greater customer collaboration, and better operating margins.

Meanwhile, in E-Infrastructure, Sterling prices projects phase-by-phase, allowing it to incorporate real-time material and labor costs. This flexible pricing model helped preserve profitability during volatile commodity cycles and tariff shifts.

Strategic M&A and Geographic Expansion

The acquisition of Drake Concrete during the first quarter of 2025 was a strategic move to expand Sterling’s footprint in the Dallas-Fort Worth residential market. While Building Solutions saw a decline in legacy residential volumes due to affordability challenges, Drake allows Sterling to diversify customer concentration and prepare for an eventual housing recovery. The acquisition is expected to contribute $55 million in revenues and $6.5 million in EBITDA in 2025.

Looking ahead, Sterling is prioritizing E-Infrastructure-focused M&A, with Texas identified as a high-opportunity geography due to surging investment in data centers, chip fabrication, and other onshoring-related projects. The company is also exploring horizontal integration opportunities in electrical, mechanical, and specialty piping, which would enhance its turnkey offering in site development.

STRL's Estimate Movement

The company surpassed profit estimates in each of the trailing four quarters, with the average earnings surprise being 11.5%. It is also witnessing northbound estimate revisions for 2025 EPS. The estimated figure now indicates 38.5% growth for 2025.

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A Look at Sterling Stock Valuation

From a valuation standpoint, the company is currently trading at a premium relative to its industry and historical metrics, with its forward 12-month price-to-earnings (P/E) ratio sitting above its five-year average.

However, STRL is priced higher than some of its industry peers, such as Dycom, which trades at 19.71X. However, it trades lower than Construction Partners and Comfort Systems USA, which trade at 40.08X and 23.02X, respectively.

Sterling’s P/E Ratio (Forward 12-Month) vs. Industry

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Is STRL Stock a Buy, Hold, or Sell Now?

Sterling presents a compelling buy opportunity backed by strong fundamentals, consistent execution, and robust sector tailwinds. The company kicked off 2025 with a standout performance, delivering 29% EPS growth and 31% adjusted EBITDA growth, driven by record margins, disciplined project delivery, and strategic capital allocation. Sterling’s E-Infrastructure segment, led by data center demand, is the core growth engine, with 18% revenue growth and a 61% jump in operating income, signaling accelerating momentum in AI-linked infrastructure. Its record $2.13 billion backlog, supported by multi-phase visibility and solid growth in both E-Infrastructure and Transportation Solutions, provides long-term revenue clarity.

With a 6.6% stock gain post-earnings, STRL - a Zacks Rank #2 (Buy) company - has outpaced peers and trades at a discount to its 52-week high while still outperforming major indices. Its continued margin discipline, accretive M&A, and upward estimate revisions for 2025 EPS growth (38.5%) reinforce a bullish case. For investors seeking mid-cap infrastructure exposure, STRL stands out as a strong growth candidate. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.