Sterling Stock Surges 90% YTD: Should Investors Ride the Rally?

Shares of Sterling Infrastructure, Inc. STRL have surged 90.3% in the year-to-date period (“YTD”), well above the Zacks Engineering – R&D Services industry’s 14.3% growth. The stock has further outperformed the broader Construction sector and the S&P 500, which have advanced 5.9% and 18.9%, respectively in the same period.

This Texas-based infrastructure services provider has been gaining strong traction as demand for mission-critical work continues to build across the country. Growth in data centers, e-commerce and manufacturing is lifting activity in its E-Infrastructure segment, while the addition of CEC is strengthening its position in electrical services with early signs of smooth integration. With a rising backlog and steady pull from hyperscalers and industrial clients, the company is entering the next phase of expansion with solid visibility and a healthy pipeline of opportunities.

STRL Stock Outperforms Peers, Industry & Market

STRL stock has outperformed some other players, including AECOM ACM, Fluor Corporation FLR and KBR, Inc. KBR. So far this year, AECOM, Flour and KBR have lost 12.4%, 23.1% and 31.6%, respectively. Let us look at the factors driving this performance.

CEC Integration Poised to Unlock Margin Expansion for STRL

Sterling’s acquisition of CEC is beginning to show strong strategic and financial benefits, enhancing its capabilities in mission-critical electrical services. Customer reception has been positive, and early collaboration between CEC and Sterling’s site-development teams is already creating operational efficiencies. This integration mirrors the margin gains Sterling achieved earlier in the year when combining its operations with a smaller conduit business. During the third quarter, CEC contributed more than $41 million in revenues and delivered margins in line with expectations.

The unit also secured several large data center-related awards, reinforcing the value of combining electrical and site-development services under one platform. The company highlighted meaningful productivity improvements as both organizations work jointly on new opportunities across key regions.

Sterling expects CEC to play a major role in expanding segment margins through 2026 and 2027. With mission-critical electrical work carrying higher profitability and growing customer preference for bundled services, the company sees room for continued margin expansion and deeper penetration into large data center and hyperscale programs.

STRL’s Expansion Targets Emerging High-Growth Markets

Sterling is positioning itself for the next wave of large-scale infrastructure investment by expanding into new geographic markets. While Texas remains a major focus, where STRL recently initiated site-development work, it is also targeting regions expected to see substantial mission-critical activity in the coming two to three years. The company emphasized the importance of establishing an early footprint to secure long-term opportunities.

In the third quarter, STRL noted strong customer pull into new locations, driven by hyperscalers, semiconductor manufacturers and e-commerce operators planning multi-year capital deployments. The company has deployed teams into selected markets ahead of upcoming megaprojects, ensuring readiness when projects move from design to execution. Sterling expects geographic expansion to be a key source of contract awards through 2026 and beyond.

STRL’s Mission-Critical Mix Lifted by E-Commerce and Manufacturing

Sterling continues to benefit from growing demand across mission-critical markets beyond data centers, particularly in e-commerce and manufacturing. The company highlighted a more than 150% increase in e-commerce-related backlog as companies expand fulfillment centers to support EV fleets and automation. These projects now require deeper underground utility networks and higher electrical capacity, making them similar to data center developments.

Manufacturing activity also remained solid, with several large semiconductor and industrial megaprojects moving closer to execution. While many sites are still in permitting and pre-construction phases, STRL has visibility into multi-year opportunities that align with its site-development and electrical-service capabilities.

Looking into 2026 and 2027, Sterling expects e-commerce and manufacturing to remain strong contributors to its mission-critical portfolio. These end markets carry favorable margins and longer project durations, helping diversify revenue sources and providing stability even if the broader construction environment becomes uneven.

Sterling’s Backlog and Pipeline Support Multi-Year Visibility

Sterling’s combined backlog, unsigned awards and future phase opportunities continue to provide multi-year visibility, offering a clear line of sight on revenues through 2026. The company emphasized that it now has a deep pool of work spanning E-Infrastructure, manufacturing, data centers and e-commerce, reflecting strong customer relationships and ongoing capital commitments.

In the third quarter, Sterling reported a $2.6 billion signed backlog, up 64% year over year. When including negotiated awards and future phases of ongoing megaprojects, total potential work exceeds $4 billion. E-Infrastructure accounts for most of this pipeline, supported by a high volume of large, complex, multi-phase developments.

Looking forward, Sterling sees sustained demand across core markets, supported by long-term customer planning, strong capital allocation by hyperscalers and upcoming manufacturing megaprojects. This visibility allows STRL to plan resources efficiently and reinforces the company’s confidence in delivering another year of record performance in 2025 and continued momentum into 2026.

Taking a Look at Sterling Stock’s Valuation

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 27.1, as shown in the chart below.

Furthermore, STRL stock appears overvalued compared with peer companies, with AECOM, Fluor and KBR trading at a forward P/E of 17.71, 18.94 and 10.16, respectively.

Analysts Project Upside Despite Premium Valuation

Despite its high valuation, Sterling’s upward revisions in earnings per share (EPS) estimates highlight analysts’ confidence in the stock. STRL’s earnings estimates for 2025 and 2026 have trended upward in the past 30 days to $10.43 and $11.95 per share, respectively. The estimated figures imply year-over-year growth of 71% and 14.6%, respectively.

Conversely, AECOM and KBR’s earnings in the current year are likely to witness year-over-year increases of 8% and 13.8%, respectively, while Fluor’s earnings are expected to decline 7.3%.

Final Take on STRL Stock

Sterling has positioned itself well for continued growth, supported by strong execution across mission-critical markets, expanding geographic presence and rising demand from data centers, e-commerce and semiconductor manufacturing. The successful integration of CEC, combined with early-entry strategies into new high-growth regions, enhances margin potential and strengthens Sterling’s competitive positioning. A robust backlog and deep multi-phase pipeline visibility further reinforce STRL’s outlook through 2026 and beyond.

Despite trading at a premium to peers, STRL continues to see upward revisions in earnings estimates and growing exposure to higher-margin work, suggesting it is well-positioned to sustain momentum and drive long-term value. With a Zacks Rank #1 (Strong Buy) at present, the stock remains a notable name in the construction and infrastructure space. 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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