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Here's Why Sterling Construction (STRL) Stock is a Must Buy
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Shares of heavy civil construction company, Sterling Construction Company, Inc. (STRL - Free Report) , have been performing well of late. The shares have yielded a year-to-date return of around 24.1% in contrast to the subindustry’s dip of 6.8%. If you haven’t taken advantage of the share price appreciation yet, the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead. The stock has an estimated long-term earnings growth rate of 11%.
Favorable Zacks Rank & Score
Sterling Construction currently carries a Zacks Rank #2 (Buy) and also has a VGM score of “B”. Here ‘V’ stands for Value, ‘G’ for Growth and ‘M’ for Momentum. The score is a weighted combination of these three scores. Such a score allow investors to eliminate the negative aspects of stocks and select winners.
Estimates Moving Up
Estimates for fiscal 2017 and 2018 for Sterling Construction have moved up in the past 30 days, reflecting the optimistic outlook of analysts.
The estimate for fiscal 2017 has soared 80% to 36 cents, reflecting a year-over-year growth of 188.75%. The Zacks Consensus Estimate for earnings for fiscal 2018 has also moved up 52% to 96 cents, a year-over-year growth of 169%.
Ahead of the Industry
In the last one year, Sterling Construction outperformed the Zacks classified Building Products- Heavy Construction sub-industry with respect to price performance. The stock soared 109.6%, while the subindustry recorded growth of 7.1%.
Upbeat Q1 & Guidance
As of first-quarter end, Sterling Construction’s total backlog was $925 million, up 12.4% sequentially owing to new projects wins throughout its operating footprint, with some notably large wins in both Utah and California. This excluded $55 million of projects where the company was the apparent low bidder but the contract had not yet been signed.
The company delivered strong growth in revenues and improved gross margins in the first quarter. It continues to drive cost reductions and process improvements in its Texas business that helped double margins in the first quarter.
Given that the core heavy civil construction operations are well positioned deliver consistent profitability and pipeline of awards remain solid, and including the impact of the Tealstone acquisition, the company now projects 2017 revenues to be between $850 million and $880 million. Net income is anticipated to be in the range of $9 million to $11 million.
Growth Path Ahead
Sterling Construction completed the acquisition of Denton, TX-based concrete construction company, Tealstone Construction for $85 million. This takeover will help it expand in adjacent markets with higher margin project opportunities.
In the last two years, the company has delivered a successful, turnaround and dramatically improved balance sheet and overall financial strength. Its core markets remain strong and backlog is at an all-time high. The company is now thus well positioned to generate substantial earnings growth in the future.
Boise Cascade has an average positive earnings surprise of 114.74% in the trailing four quarters. Its shares have gained 24.7% in the past one year. TopBuild generated an average positive earnings surprise of 5.97% in the past four quarters and its shares clocked a 50.8% gain in the last one year. Potlatch Corporation has an average positive earnings surprise of 42.59% in the last four quarters. Potlatch Corporation’s shares rose 37% in the last one year.
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Here's Why Sterling Construction (STRL) Stock is a Must Buy
Shares of heavy civil construction company, Sterling Construction Company, Inc. (STRL - Free Report) , have been performing well of late. The shares have yielded a year-to-date return of around 24.1% in contrast to the subindustry’s dip of 6.8%. If you haven’t taken advantage of the share price appreciation yet, the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead. The stock has an estimated long-term earnings growth rate of 11%.
Favorable Zacks Rank & Score
Sterling Construction currently carries a Zacks Rank #2 (Buy) and also has a VGM score of “B”. Here ‘V’ stands for Value, ‘G’ for Growth and ‘M’ for Momentum. The score is a weighted combination of these three scores. Such a score allow investors to eliminate the negative aspects of stocks and select winners.
Estimates Moving Up
Estimates for fiscal 2017 and 2018 for Sterling Construction have moved up in the past 30 days, reflecting the optimistic outlook of analysts.
The estimate for fiscal 2017 has soared 80% to 36 cents, reflecting a year-over-year growth of 188.75%. The Zacks Consensus Estimate for earnings for fiscal 2018 has also moved up 52% to 96 cents, a year-over-year growth of 169%.
Ahead of the Industry
In the last one year, Sterling Construction outperformed the Zacks classified Building Products- Heavy Construction sub-industry with respect to price performance. The stock soared 109.6%, while the subindustry recorded growth of 7.1%.
Upbeat Q1 & Guidance
As of first-quarter end, Sterling Construction’s total backlog was $925 million, up 12.4% sequentially owing to new projects wins throughout its operating footprint, with some notably large wins in both Utah and California. This excluded $55 million of projects where the company was the apparent low bidder but the contract had not yet been signed.
The company delivered strong growth in revenues and improved gross margins in the first quarter. It continues to drive cost reductions and process improvements in its Texas business that helped double margins in the first quarter.
Given that the core heavy civil construction operations are well positioned deliver consistent profitability and pipeline of awards remain solid, and including the impact of the Tealstone acquisition, the company now projects 2017 revenues to be between $850 million and $880 million. Net income is anticipated to be in the range of $9 million to $11 million.
Growth Path Ahead
Sterling Construction completed the acquisition of Denton, TX-based concrete construction company, Tealstone Construction for $85 million. This takeover will help it expand in adjacent markets with higher margin project opportunities.
In the last two years, the company has delivered a successful, turnaround and dramatically improved balance sheet and overall financial strength. Its core markets remain strong and backlog is at an all-time high. The company is now thus well positioned to generate substantial earnings growth in the future.
Other Stocks to Consider
Other top-ranked stocks worth considering in the same sector are Boise Cascade Company (BCC - Free Report) , TopBuild Corp. (BLD - Free Report) and Potlatch Corporation (PCH - Free Report) . All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boise Cascade has an average positive earnings surprise of 114.74% in the trailing four quarters. Its shares have gained 24.7% in the past one year. TopBuild generated an average positive earnings surprise of 5.97% in the past four quarters and its shares clocked a 50.8% gain in the last one year. Potlatch Corporation has an average positive earnings surprise of 42.59% in the last four quarters. Potlatch Corporation’s shares rose 37% in the last one year.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>