Back to top

Image: Bigstock

STRL Gears Up to Post Q2 Earnings: Buy or Hold Ahead of Results?

Read MoreHide Full Article

Key Takeaways

  • STRL is projected to post Q2 EPS of $2.26 on revenues of $555.1M, suggesting a 4.8% y/y fall.
  • Results will likely reflect data center demand, strong backlog and steady transportation activity.
  • Revenues are likely to have been pressured by residential softness, inflation and broader market volatility.

Sterling Infrastructure, Inc. (STRL - Free Report) is scheduled to report second-quarter 2025 results on Aug. 4, after the closing bell.

In the last reported quarter, Sterling reported 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. Revenues were $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. The gross margin expanded 450 basis points to 22%, reflecting operational efficiencies and a favorable project mix.

This Texas-based e-infrastructure solutions, building solutions and transportation solutions provider has an impressive record of surpassing earnings expectations, exceeding the consensus mark in the last four quarters. The average surprise over this period is 11.5%, as shown in the chart below.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

How Are Estimates Placed for STRL?

The Zacks Consensus Estimate for the second-quarter EPS has been unchanged at $2.26 over the past 30 days. The estimated figure suggests 35.3% growth from the year-ago reported figure. The consensus mark for revenues is $555.1 million, indicating a 4.8% year-over-year decline.

For 2025, STRL is expected to register 41.2% EPS growth from that reported a year ago.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

What the Zacks Model Unveils for Sterling

Our proven model does not predict an earnings beat for Sterling for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) for this to happen. This is not the case here, as you will see below.

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

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping STRL’s Q2 Performance

Sterling continues to strengthen its presence in the expanding e-infrastructure and transportation markets. The company is seeing gains from the E-Infrastructure segment’s stability, steady bid activity in key transportation areas, and a strong backlog. With rising data center demand and sustained federal infrastructure spending, Sterling is likely to maintain its growth momentum in the second quarter of 2025.

Segment-wise, E-Infrastructure Solutions (which accounted for 51% of first-quarter 2025 revenues) is expected to have remained a key driver in the second quarter. The segment likely benefited from stable demand, supported by rising data center activity, driven by AI and digital transformation. E-commerce growth and small industrial developments are anticipated to have contributed to a more balanced revenue mix. The segment is also likely to have gained from consistent bidding activity in key transportation markets and visibility into multi-year digital infrastructure projects.

The Transportation Solutions segment (which accounted for 28% of the total first-quarter 2025 revenues) is expected to have supported growth in the second quarter. The segment likely benefited from a strong backlog and steady bid activity. The company is expected to have seen solid demand in core markets like the Rocky Mountain and Arizona. The focus on complex infrastructure projects with better returns is expected to have supported performance. Ongoing federal funding under the IIJA and discussions around additional infrastructure investment likely added to overall visibility.

Sterling’s Building Solutions segment (which accounted for 21% of the total first-quarter 2025 revenues) is expected to have faced mixed conditions in the second quarter. The segment is likely to have benefited from the Drake acquisition and steady activity in core regions, such as Dallas, Fort Worth, Houston and Phoenix. Demand trends in these geographies are expected to be healthy over the long term.

However, continued softness in the residential market, driven by affordability concerns and high interest rates, may have limited near-term performance. Commercial activities are also likely to have been subdued.

Ongoing market volatility, driven by trade policy uncertainties, inflationary pressures and shifting consumer sentiment, is likely to have hurt the company’s top-line performance in the to-be-reported quarter.

From the margin perspective, Sterling is expected to have benefited from a strong mix of high-value infrastructure projects. A continued focus on large, complex builds, especially in data centers, likely supported higher margins within the E-Infrastructure segment. The company’s disciplined approach to project selection and emphasis on execution efficiency are also expected to have supported margin improvement.

STRL Stock’s Price Performance & Valuation

So far this year, shares of Sterling have gained 58.8% compared with the Zacks Engineering - R and D Services industry’s and the S&P 500’s rallies of 15.1% and 7.4%, respectively. The STRL stock has also outperformed the broader Construction sector's 3.8% rise during the same period. The STRL stock has outperformed some other players, including AECOM (ACM - Free Report) , Fluor Corporation (FLR - Free Report) and KBR, Inc. (KBR - Free Report) . In the said time frame, AECOM, Flour and KBR have gained 5.6%, 15.1%, respectively, while KBR has declined 19.3%.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Sterling shares are currently trading at a forward 12-month price-to-earnings (P/E) ratio of 29.37, a 30.3% premium to the industry average of 22.54.

STRL’s P/E Ratio (Forward 12 Months) vs. Industry

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

The STRL stock also appears overvalued compared with other peer companies. AECOM, Fluor and KBR have a forward P/E of 20.02, 21.27 and 11.48, respectively.

Should You Hold on to the STRL Stock Now?

Sterling is likely to have seen a steady performance in the second quarter, supported by solid execution, a favorable project mix and stable demand in key markets. While broader challenges are anticipated to weigh on its near-term results, the company’s strategic focus and strong backlog suggest that it is positioned for growth through 2025.

It may be prudent for investors to monitor the stock for further updates. For existing investors, the stock’s long-term prospects may justify holding their position, with further updates likely to offer more clarity post-earnings.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Fluor Corporation (FLR) - free report >>

AECOM (ACM) - free report >>

KBR, Inc. (KBR) - free report >>

Sterling Infrastructure, Inc. (STRL) - free report >>

Published in