Sterling Construction ((STRL)) has held its Q3 earnings call. Read on for the main highlights of the call.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Sterling Construction’s recent earnings call painted a largely positive picture, emphasizing strong revenue growth, a significant increase in backlog, and robust financial performance, particularly in the E-Infrastructure and Transportation segments. Despite facing challenges in the Building Solutions segment and the broader housing market due to affordability issues, the overall sentiment was optimistic, with positive highlights outweighing the lowlights.
Outstanding Revenue Growth
Sterling Construction reported an impressive 32% increase in revenue, largely driven by a 58% growth in the E-Infrastructure Solutions segment, which included 42% organic growth. The Transportation segment also contributed with a 10% increase, showcasing the company’s strong performance across multiple sectors.
Significant Increase in Backlog
The company’s backlog at the end of the quarter reached $2.6 billion, marking a 64% year-over-year increase. Even without considering the recent CEC acquisition, the backlog grew by 34%. The E-Infrastructure Solutions backlog alone saw a 97% increase, highlighting the company’s expanding project pipeline.
Record Adjusted Earnings and EBITDA
Sterling achieved record adjusted earnings per share, which rose by 58% to $3.48. Additionally, adjusted EBITDA increased by 47% to $156 million, reflecting the company’s strong financial health and operational efficiency.
Strong Cash Flow and Liquidity
The company reported an operating cash flow of $84 million for the quarter, with a cash net of debt balance of $11.8 million. Sterling also maintained a $150 million undrawn credit facility, underscoring its strong liquidity position.
Positive Market Outlook
Sterling expressed optimism about multiyear growth opportunities, particularly in data centers and manufacturing markets. The company has a visible pipeline of work exceeding $4 billion, indicating a promising future.
Building Solutions Challenges
The Building Solutions segment faced difficulties, with a 1% decline in revenue and a 10% drop in adjusted operating income. The residential business was particularly affected, with a 17% revenue fall due to softness in the housing market.
Permitting Delays
Post-COVID, the permitting process has lengthened, impacting the timing of project starts. However, these delays occur before site work begins, allowing some flexibility in project execution.
Affordability Issues in Housing Market
Potential homebuyers are facing affordability challenges, affecting demand in key markets like Dallas-Fort Worth, Houston, and Phoenix. This has contributed to the decline in the residential business segment.
Forward-Looking Guidance
Sterling Construction provided an optimistic financial outlook for the remainder of 2025. The company expects a revenue increase of 32% year-over-year, driven by significant growth in the E-Infrastructure and Transportation segments. Adjusted earnings per share are projected to grow by 58% to $3.48, with adjusted EBITDA reaching between $486 million and $491 million. The company also anticipates expanding its gross profit margins and maintaining a robust pipeline of future opportunities.
In summary, Sterling Construction’s earnings call reflected a positive sentiment, driven by strong revenue growth and a substantial increase in backlog. While challenges persist in the Building Solutions segment and the housing market, the company’s forward-looking guidance suggests continued strategic growth and expansion in high-margin markets.