Sterling Infrastructure, Inc. (STRL Quick QuoteSTRL - Free Report) has regained momentum, with shares rising 12.2% over the past month. The gain compares favorably with a 1.4% decline for the Zacks Engineering - R and D Services industry and a 3.2% dip for the Zacks Construction sector. The stock also outpaced the S&P 500’s 1.2% increase during the same period.

STRL Price Performance (1-Month)

Image Source: Zacks Investment Research

Sterling is currently trading above both its 50-day and 200-day moving averages, signaling improved investor sentiment.

STRL Stock Trades Above 50-Day & 200-Day SMAs

Image Source: Zacks Investment Research

The rebound comes as Sterling’s transformation toward higher-margin E-Infrastructure continues to gain traction. Data centers, semiconductor facilities and other mission-critical projects are driving a growing share of revenues and backlog, while recent acquisitions have expanded its electrical capabilities. The key question is whether this demand can support the stock after its recent advance.

Data Center Demand Remains Sterling’s Main Growth Engine

Sterling’s E-Infrastructure business remains at the center of its growth story. Second-quarter 2026 E-Infrastructure revenues surged 192% year over year, with mission-critical activity, including data centers and semiconductor campuses, serving as the primary driver. Adjusted operating income for the segment climbed 148%, while adjusted operating margins remained strong at about 24%.

Importantly, the outlook extends beyond current projects. E-Infrastructure signed backlog, unsigned electrical awards and future-phase site-development opportunities exceeded $6 billion at the end of the quarter. Mission-critical work, including data centers, large manufacturing projects and semiconductor facilities, represented more than 92% of signed E-Infrastructure backlog.

Sterling is also seeing data center projects become larger and longer in duration, while existing projects are expanding beyond their original scope. Management indicated that some of these incremental opportunities have yet to enter backlog, suggesting that reported backlog may not fully capture the potential pipeline. CEC has further strengthened Sterling’s ability to combine electrical and site-development work, giving the company a broader offering for mission-critical customers.

This combination should help sustain strong E-Infrastructure growth if hyperscale computing, artificial intelligence infrastructure and related power requirements continue to drive data center construction.

Backlog and Execution Provide Strong Revenue Visibility

Sterling’s overall backlog provides another reason for optimism. Signed backlog reached $4.33 billion at June 30, 2026, up 116% year over year, while combined backlog increased 150% to $5.62 billion. Excluding acquisition effects, signed backlog still increased 50%. High-probability future-phase work exceeded $1.4 billion, bringing Sterling’s total visibility across signed backlog, unsigned awards and future phases to more than $7 billion.

The company is converting that demand into strong financial performance. Second-quarter revenues rose 90% to $1.17 billion, while adjusted earnings per share (EPS) jumped 116% to $5.80. Adjusted EBITDA increased 104%, with the adjusted EBITDA margin reaching 22%.

Sterling has also been selective about the projects it pursues, favoring opportunities with stronger customer relationships, better margins and longer-term growth potential. That discipline has supported margin expansion even as the company rapidly scales its operations.

Investments and Acquisitions Can Expand Sterling’s Capacity

Sterling is increasing investment to prepare for continued growth. First-half operating cash flow totaled $328 million, while management raised 2026 capital expenditure guidance to $130-$140 million. Spending is being directed toward expanding and upsizing the equipment fleet, raising productivity and increasing operating capacity. At June-end, Sterling had $464 million in cash against $284 million of debt, leaving it with a net cash position and financial flexibility for organic investments and acquisitions.

Stone Ridge adds capacity and expands Sterling’s presence in the Pacific Northwest, while CEC has significantly broadened its electrical capabilities. The company is also investing in recruiting, training and electrical prefabrication, which should help address the workforce needs created by larger and more complex projects.

Bullish Analysts’ Expectation for STRL Stock

Earnings expectations support this outlook. The Zacks Consensus Estimate for 2026 EPS has risen to $20.02 from $19.54 over the past 60 days, implying 84% growth from 2025. Revenues are projected to increase 65.1%. For 2027, the consensus estimate projects EPS and revenues to rise another 28.8% and 19.6%, respectively.

Image Source: Zacks Investment Research

Housing Weakness and Project Timing Remain Key Risks

Sterling’s growth profile is strong, but not every business is moving in the same direction. Transportation Solutions revenues declined 20% in the second quarter as Sterling deliberately shifted resources toward higher-margin E-Infrastructure projects. Although Transportation margins improved sharply, management expects full-year segment revenues to decline 7-10% as this reallocation continues.

Building Solutions is another weak spot. Second-quarter revenues declined 1% amid relatively flat homebuilder activity, while adjusted operating income fell 11%. Housing affordability pressures are expected to keep residential conditions challenging through 2026.

Backlog growth may also be uneven from quarter to quarter. Management warned that strong revenue burn and the timing of awards could lead to a sequential backlog decline in the third quarter, even though underlying bid activity remains strong. Rapid expansion itself creates execution risks, including the need to recruit skilled employees, deploy equipment and integrate acquired operations without sacrificing margins.

Valuation Reflects Better Prospects, but Is No Longer Cheap

Sterling trades at 23.06X forward 12-month earnings, slightly below the industry’s 23.56X but above its five-year median of 18.40X. Therefore, the stock does not look stretched relative to the industry, but investors are already paying a higher multiple than Sterling has typically commanded.

STRL Valuation vs Industry - P/E (F12M)

Image Source: Zacks Investment Research

That premium to its historical median places greater importance on continued data center awards, successful execution and sustained earnings revisions. Any slowdown in mission-critical spending or weaker-than-expected project conversion could pressure the multiple.

Sterling Stock Faces Quanta, MasTec and Granite

Quanta Services (PWR Quick QuotePWR - Free Report) , MasTec (MTZ Quick QuoteMTZ - Free Report) and Granite Construction (GVA Quick QuoteGVA - Free Report) provide useful benchmarks for Sterling.

Quanta shares have gained 12.7% in the past month, slightly ahead of Sterling’s 12.2% rise, while Quanta trades at a much richer 36.42X forward 12-month earnings. Quanta remains a major competitor for power, electrical and mission-critical infrastructure work, and Quanta’s broader scale gives it significant exposure to data center-related investment. 

MasTec shares have lost 7.3% over the same period and trade at 18.28X. MasTec competes across electrical, communications and mission-critical infrastructure, making it relevant as Sterling expands beyond site development. MasTec’s lower valuation, however, reflects a different mix of businesses and growth drivers. 

Granite shares are up 1.5% and trade at 14.19X forward 12-month earnings. Granite competes more directly in heavy civil, transportation and site work. Granite’s cheaper valuation reflects less direct exposure to Sterling’s fast-growing data center opportunity.

STRL Price Performance vs Peers (1-Month)

Image Source: Zacks Investment Research

Bullish Analyst Expectations for STRL Stock

Analysts also remain optimistic about Sterling’s prospects. The company currently carries an average brokerage recommendation (ABR) of 1.20 on a scale of 1 to 5, where 1 represents Strong Buy and 5 represents Strong Sell. The ABR is based on recommendations from 10 brokerage firms. Of these, nine carry a Strong Buy rating, accounting for 90% of the total recommendations. This strong analyst sentiment complements Sterling’s improving earnings outlook, expanding mission-critical backlog and continued strength in data center demand, providing further support for the stock’s recent rebound.

Should Investors Buy STRL After the Rebound?

Sterling’s recent rally is supported by more than momentum. Mission-critical demand remains strong, backlog provides substantial visibility, margins are holding up well and estimates continue to move higher. The company’s growing ability to combine site development with electrical services should also strengthen its position on increasingly complex data center projects.

Risks from residential weakness, project-award timing and the demands of rapid capacity expansion deserve attention, while the stock’s valuation is above its historical median. Still, Sterling’s earnings outlook, expanding mission-critical pipeline and positive estimate revisions suggest that the growth story remains intact. The company’s favorable brokerage sentiment, with nine of 10 recommendations at Strong Buy, provides additional support.

With a Zacks Rank #2 (Buy), Sterling appears well positioned to extend its gains if data center and broader E-Infrastructure demand continue to translate into awards, revenue growth and earnings expansion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.