Can Sterling Hold Its Edge in a Tight Construction Market?

As competition intensifies in the construction and infrastructure space, Sterling Infrastructure, Inc. (STRL) is leaning on scale, execution and diversification to protect its edge. The company has positioned itself at the center of long-term demand drivers like data centers, e-commerce distribution and critical transportation projects, areas where reliability and speed often matter more than lowest cost.

Sterling’s E-Infrastructure Solutions segment has become its strongest growth engine, with backlog climbing 44% year over year at the end of the second quarter. Mission-critical projects, particularly data centers, now represent a majority of its pipeline. Management notes that its ability to complete large-scale, multi-phase projects on or ahead of schedule has translated into both repeat business and pricing power.

Transportation Solutions also remains solid, with growth supported by federal infrastructure funding and regional demand. While the planned wind-down of low-margin Texas highway work temporarily weighs on backlog, it should ultimately lift profitability. On the other hand, Building Solutions faces housing affordability headwinds. Sterling expects revenue declines in that segment through year-end.

Financially, Sterling continues to demonstrate strong execution. In its latest quarter, revenues grew double-digits while gross margins expanded 400 basis points to 23.3%. Operating cash flow remains robust and management raised full-year EPS guidance, signaling confidence in future performance.

To reinforce its competitive moat, Sterling is also pursuing strategic acquisitions. The pending purchase of CEC Facilities Group adds mechanical and electrical services, creating a more integrated offering that could further differentiate Sterling from rivals focused solely on price.

By combining operational discipline with selective expansion, Sterling is aiming to hold its ground, even as the construction market grows tighter.

Competitors in a Challenging Landscape

Sterling Infrastructure’s ability to preserve the competitive edge is shaped not only by internal execution but also how it stacks up against rivals. Granite Construction (GVA) is a key competitor in the heavy civil and transportation space. Like Sterling, Granite is benefiting from federal infrastructure funding but faces ongoing project execution challenges and margin pressures. Granite’s focus on large-scale public works means it often competes with Sterling in transportation markets, where disciplined bidding is critical to sustaining profitability.

Another relevant peer is Tutor Perini (TPC), which competes in complex infrastructure and building projects. Tutor Perini has struggled with project delays and cost overruns, which have weighed on earnings consistency. Compared with Sterling’s disciplined project management, these challenges highlight its relative strength in delivering mission-critical projects on time and on budget.

Ultimately, while peers wrestle with execution risks, Sterling’s diversified portfolio and strong backlog may allow it to maintain the edge in a tightening construction market.

STRL’s Price Performance, Valuation and Estimates

Shares of this Texas-based infrastructure services provider have surged 50.4% in the past three months, outperforming the Zacks Engineering - R and D Services industry’s growth of 6.6%.

Price Performance

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 32.46, as evidenced by the chart below.

P/E (F12M)

For 2025 and 2026, STRL’s earnings estimates have trended upward in the past 30 days to $9.57 and $10.98 per share, respectively. The revised estimated figures indicate 56.9% and 14.7% year-over-year growth, respectively.

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

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

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