Sterling Raises EPS Guidance: Can Margins Continue to Expand in 2025?

Sterling Infrastructure, Inc. STRL has continued to show strength in profitability, prompting an increase in its full-year 2025 earnings guidance. The company’s emphasis on high-value projects and a disciplined portfolio mix has been critical to driving profitability.

Sterling Infrastructure raised its full-year 2025 earnings guidance after reporting strong second-quarter results, with margin expansion playing a central role. The company’s focus on high-value projects and disciplined portfolio mix has been critical to driving profitability.

In the second quarter of 2025, adjusted earnings per share (EPS) rose 41% year over year to $2.69. Gross profit margins expanded 400 basis points (bps) year over year to 23.3%, which marked a new high for the company. This expansion reflected a strategic shift toward higher-margin service offerings, particularly in mission-critical E-Infrastructure projects such as data centers, where efficient execution and timely delivery remain highly valued. Growth in e-commerce distribution also supported the segment’s backlog, further strengthening visibility. The improvement in gross margins, alongside revenue growth, drove adjusted EBITDA higher by 35% to $126 million.

Owing to these results, the company raised its adjusted EPS guidance for 2025 to a range of $9.21-$9.47, up 8% at the midpoint from prior expectations. The company also highlighted Transportation Solutions as another contributor to profitability, with margin gains expected as lower-return Texas operations are wound down and resources are reallocated to stronger markets.

The company’s emphasis on large-scale, high-margin projects positions it well to maintain profitability. While housing affordability challenges remain a drag on Building Solutions, the strength of E-Infrastructure and transportation improvements indicates Sterling Infrastructure is on track to sustain healthy margins through the rest of 2025.

Peer Focus on Expanding Margins

Margin expansion has also been a key focus for infrastructure peers. EMCOR Group, Inc. EME and MasTec, Inc. MTZ are two notable companies that reported improved profitability in the second quarter of 2025. 

EMCOR delivered strong profitability in the second quarter of 2025. The company reported adjusted EPS of $6.72, up 28% year over year, supported by operating margin expansion of 50 bps to 9.6%. EMCOR attributed the gains to disciplined project execution and a favorable mix of work in data centers, healthcare and industrial markets. Remaining performance obligations of $11.9 billion increased 32% year over year, strengthening visibility into margin-driven growth.

MasTec also highlighted profitability improvements in the second quarter of 2025. Adjusted EPS of $1.49 beat the Zacks Consensus Estimate of $1.41 by 5.7%, reflecting a 49.1% year-over-year increase. Non-pipeline operations delivered an adjusted EBITDA margin of 8.5%, a 100 basis point improvement year over year. The Communications segment achieved a 90 basis point margin gain year over year, and Clean Energy and Infrastructure expanded margins by 240 basis points. Backlog reached $16.45 billion, up 23% year over year, giving MasTec a strong base for continued profitability.

STRL’s Price Performance, Valuation and Estimates

Shares of this Texas-based infrastructure services provider have surged 40.1% in the past three months, outperforming the Zacks Engineering - R and D Services industry’s growth of 6%.

STRL stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 30.49, as evidenced by the chart below. The overvaluation of the stock compared with the industry peers indicates the strong potential in the market, given the favorable trends backing it up.

For 2025 and 2026, STRL’s earnings estimates have trended upward in the past 30 days to $9.20 and $10.30 per share, respectively. The revised estimated figures reflect 50.8% and 12% year-over-year growth, respectively.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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