Sterling Construction Company, Inc.
(STRL - Free Report
) stock looks promising at the moment. We are optimistic about the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks full of potential and is poised to carry the momentum ahead.
Let’s delve deeper and find out what are the factors that make this heavy civil construction company an attractive investment option at the moment.
What’s Working in Favor of Sterling Construction?
Favorable Zacks Rank & Score: Sterling Construction currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
It 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 allows investors to eliminate the negative aspects of stocks and select winners. Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or #2 offer the best upside potential.
Healthy Growth Projections: The estimate for fiscal 2017 is currently pegged at 39 cents per share, a turnaround from the loss of 40 cents in the prior fiscal. The Zacks Consensus Estimate for earnings for fiscal 2018 is at 96 cents, reflecting a 144.87% year-over-year improvement. The company has an estimated long-term earnings growth rate of 11%.
Ahead of the Industry:
In the past year, Sterling Construction significantly outpaced the industry
with respect to price performance. The stock soared 81%, while the industry rose 3.4%.
Positive Earnings Surprise History: Sterling Construction topped the Zacks Consensus Estimate by a wide margin in the last reported quarter, recording a positive surprise of 228.57%. The company has an average positive earnings surprise of 47.01% in the trailing four quarters.
Upbeat Q2 & Guidance: Sterling Construction reported second-quarter 2017 earnings per share of 13 cents, a year-over-year improvement of 44.4% as revenues rose 30% to $246.4 million. As of second-quarter end, the company’s total backlog was $923 million, up 13.9% year over year. This excluded $76 million of projects where the company was apparently the lowest bidder but the contract had not yet been signed.
The acquisition of Tealstone contributed to improved results in the quarter. This business has provided Sterling Construction with a higher margin revenue stream with minimal integration challenges. The company expects 2017 revenues to be between $850 million and $880 million. Net income is anticipated to be in the range of $9-$11 million.
Growth Path Ahead: Sterling Construction’s acquisition of Tealstone Construction will help it expand in adjacent markets with higher margin project opportunities. It also provides it with a strong market position in residential and commercial concrete construction in a rapidly growing market.
In the last two years, the company has delivered a successful, turnaround and dramatically improved balance sheet and overall financial strength. Its core markets and backlog remains strong. Consequently, the company is now well positioned to generate substantial earnings growth in the future.
Stocks to Consider
Other top-ranked stocks worth considering in the same sector are MasTec, Inc. (MTZ - Free Report
) , TopBuild Corp. (BLD - Free Report
) and EMCOR Group, Inc. (EME - Free Report
) . While MasTec sports the same rank as Sterling Construiction, TopBuild and EMCOR carry a Zacks Rank #2 (Buy).
MasTec has an excellent earnings beat history, having surpassed estimates in the trailing four quarters. It has an average positive earnings surprise of 29.7%.
TopBuild beat estimates in the last four quarters, resulting in average positive earnings surprise of 10.4%.
EMCOR came up with an average positive earnings surprise of 11.7% in the preceding four quarters, having beaten estimates thrice in the last four quarters.
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