Will the CEC Acquisition Push Sterling Into New Growth Markets?

Sterling Infrastructure, Inc. STRL is benefiting from the ongoing demand trends across public infrastructure, especially for data center buildouts, AI infrastructure and utility grid modernization. Amid the favorable market fundamentals, to further boost its capabilities, the company also engages in inorganic initiatives, which can be substantiated by its recent strategic move.

On June 16, 2025, the company entered into a definitive agreement to acquire CEC Facilities Group, LLC, under its E-Infrastructure Solutions segment, and the acquisition is expected to close by the third quarter of 2025. CEC Facilities is a Texas-based specialty electrical and mechanical contractor, which is expected to amplify the capabilities of STRL across mission-critical electrical and mechanical services across existing and new markets, like Texas. The company believes that after the full integration of CEC Facilities’ capabilities, the combined service portfolio will be able to offer higher value, end-to-end E-Infrastructure solutions to its customers, thus ensuring higher value and better revenue visibility in the upcoming period.

As of the first six months of 2025, the E-Infrastructure Solutions segment contributed 51% to Sterling’s total revenues, growing 24.2% year over year to $528.7 million. As of June 30, 2025, E-Infrastructure Solutions’ backlog was up year over year by 44% to $1.2 billion, with major contributors being mission-critical projects, including data centers and manufacturing.

Combined with the synergies from the acquisition of CEC Facilities, the favorable market trends for public infrastructure demand are likely to boost the revenue visibility and profitability structure for Sterling in the upcoming period. Moreover, tapping into new markets through the acquisition is just an add-on to the tailwinds backing up STRL’s progress.

STRL Stock’s Price Performance vs. Other Market Players

Shares of this Texas-based infrastructure services provider have surged 117.6% in the past six months, significantly outperforming the Zacks Engineering - R and D Services industry, the broader Zacks Construction sector and the S&P 500 index.

Moreover, firms like Quanta Services, Inc. PWR and AECOM ACM offer substantial competition to Sterling in the public infrastructure field, especially across mission-critical infrastructure solutions. Although the market trends are favoring these companies, they are falling behind in realizing the benefits from the robust fundamentals compared with STRL. In the past six months, shares of Quanta Services and AECOM have gained 29.7% and 14.7%, respectively.

Sterling’s Valuation Trend

Sterling stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 32.17, as evidenced by the chart below. The overvaluation of the stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up.

Notably, Quanta Services and AECOM are currently trading at a forward 12-month P/E ratio of 33.57 and 20.83, respectively.

EPS Trend of Sterling

For 2025 and 2026, STRL’s earnings estimates have trended upward in the past seven days to $8.90 and $9.74 per share, respectively. The revised estimated figures reflect 45.9% and 9.4% year-over-year growth, respectively.

Earnings Estimate Revision

The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research