Sterling Construction ((STRL)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for Sterling Construction painted a largely positive picture, with notable achievements in adjusted EPS growth, gross profit margins, and a burgeoning e-infrastructure backlog. Despite facing some challenges, such as a decline in transportation solutions backlog and building solutions revenue, the overall sentiment was optimistic, with future prospects appearing promising.
Adjusted EPS Growth
Sterling Construction reported a remarkable 37% growth in adjusted EPS, marking the fourth consecutive year of achieving over 35% growth. This consistent performance underscores the company’s strong financial health and strategic execution.
Gross Profit Margin and Cash Flow
The company exceeded its gross profit margin targets, reaching 20.1%, and generated nearly $500 million in operating cash flow. These figures highlight Sterling’s operational efficiency and robust cash generation capabilities.
E-infrastructure Backlog
For the first time in its history, Sterling’s e-infrastructure backlog surpassed $1 billion, representing a 27% increase from the previous year. This milestone reflects the company’s successful expansion in the e-infrastructure sector.
Strong E-infrastructure Segment Performance
The e-infrastructure segment experienced a 44% growth in full-year operating income, with operating margins reaching 22%. This growth was driven by mission-critical projects, showcasing the segment’s strategic importance to Sterling’s portfolio.
Data Center Revenue Growth
The data center market significantly contributed to infrastructure revenue growth, with a more than 50% increase over the prior year. This surge underscores the growing demand for data center projects and Sterling’s ability to capitalize on this trend.
Transportation Solutions Backlog Decline
Despite the overall positive performance, the transportation solutions backlog experienced a 20% year-over-year decline, attributed to the timing of awards. This decline highlights a challenge that Sterling will need to address moving forward.
Building Solutions Revenue Decline
In the fourth quarter, building solutions revenue declined by 3%, with operating income dropping 17%. Factors such as the PPG impact and softness in the residential slab business contributed to this decline.
Residential Slab Business Decline
The residential slab business saw a 14% revenue decline, primarily due to market softness in the Dallas-Fort Worth area. This segment’s performance indicates a need for strategic adjustments to counter market challenges.
2025 Guidance
Looking ahead, Sterling Construction provided robust financial guidance for 2025, projecting revenues between $2 billion and $2.15 billion and a gross profit margin of 21% to 22%. The company expects adjusted EPS to range from $7.90 to $8.40, with adjusted EBITDA anticipated to be between $395 million and $420 million. The e-infrastructure segment is expected to continue its strong performance, while transportation solutions and building solutions are positioned for growth and margin expansion.
In summary, Sterling Construction’s earnings call conveyed a positive outlook, driven by significant growth in key financial metrics and strategic segments. Despite some challenges, the company’s forward-looking guidance suggests continued optimism and potential for growth, particularly in the e-infrastructure sector.