Will Strong Cash Flow Support STRL's Next Growth Phase?

Sterling Infrastructure, Inc. STRL posted strong results in second-quarter 2025, highlighting not just top-line expansion but also robust cash flow generation. The company reported operating cash flow of $85 million for the quarter and $170.3 million for the first six months of 2025, nearly matching last year’s pace despite higher capital expenditures and acquisition-related outflows.

This consistent cash generation is critical as STRL positions itself for the next phase of growth. With $699 million in cash and only $298 million of debt at quarter-end, Sterling boasts a net cash position of more than $400 million. Such financial strength provides flexibility to fund both organic initiatives, like expanding E-Infrastructure capabilities, and inorganic moves, including the pending $450 million acquisition of CEC Facilities Group. Management noted that CEC will add electrical and mechanical services, broadening Sterling’s end-to-end offerings in mission-critical projects.

At the same time, the company continues to return capital to its shareholders. Earlier in 2025, Sterling repurchased $43.8 million in shares, signaling confidence in its valuation and future earnings trajectory. Importantly, management extended and expanded its credit facility to 2028, further bolstering liquidity.

Looking ahead, cash flow discipline will be key to sustaining growth. Demand in E-Infrastructure, particularly from data centers and e-commerce facilities, is expected to remain strong. With rising backlog and improved margins, Sterling appears well-positioned. However, execution on acquisitions and navigating cyclical headwinds in the Building Solutions segment will test how effectively STRL can deploy its cash to maximize long-term shareholder value.

Competitors Balancing Growth and Cash Discipline

Two notable peers in the infrastructure and specialty contracting space, Jacobs Solutions J and Quanta Services PWR, offer useful comparisons to Sterling Infrastructure’s cash flow-driven strategy.

Jacobs, a global engineering and consulting leader, has leveraged its strong cash position to expand in high-growth areas, including critical infrastructure, water solutions and digital engineering. Its ability to deploy cash into strategic acquisitions while maintaining a healthy balance sheet mirrors Sterling’s approach as it looks to scale the E-Infrastructure footprint.

Meanwhile, Quanta Services, a dominant player in utility and renewable infrastructure, has demonstrated how disciplined capital allocation can support large-scale, complex projects. Like Sterling, Quanta invests heavily in expanding capabilities to capture long-cycle opportunities in power and data-driven markets.

Both peers highlight the importance of sustainable cash generation to fuel innovation, acquisitions and margin expansion, factors that Sterling must continue to leverage to stay competitive.

STRL’s Price Performance, Valuation and Estimates

Shares of this Texas-based infrastructure services provider have surged 49.4% in the past three months, outperforming the Zacks Engineering - R and D Services industry’s decline of 2.5%.

Price Performance

STRL stock is currently trading at a premium compared with its industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 34.46, as shown in 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.

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