Should Investors Hold or Fold Sterling Stock Ahead of Q4 Earnings?

Sterling Infrastructure, Inc. STRL is scheduled to report fourth-quarter 2025 results on Feb. 25, after the closing bell.

In the last reported quarter, Sterling delivered adjusted earnings per share of $3.48, surpassing the Zacks Consensus Estimate by 24.7% and rising 58% year over year. Revenues of $689 million exceeded estimates by 12.5% and increased 32% from the prior year. The company’s performance was driven by strong growth in the E-Infrastructure Solutions segment, along with steady gains in Transportation Solutions, which offset weakness in Building Solutions. 

Gross margin expanded 280 basis points to 24.7%, supported by a continued shift toward higher-margin, mission-critical projects such as data centers. Backed by solid revenue growth and margin expansion, adjusted EBITDA increased 47% from the year-ago quarter, while operating cash flow remained healthy.

This Texas-based e-infrastructure solutions, building solutions and transportation solutions provider has an impressive record of surpassing earnings expectations, exceeding the consensus mark in the last four quarters. The average surprise over this period is 14%, as shown in the chart below.

How Are Estimates Placed for STRL?

The Zacks Consensus Estimate for the fourth-quarter EPS has increased to $2.66 from $2.63 over the past 30 days. The estimated figure implies 82.2% growth from the year-ago reported figure. The consensus mark for revenues is $647.8 million, indicating 29.9% year-over-year growth.

For 2025, Sterling is expected to register a 12.6% increase from a year ago in revenues. Its bottom line is expected to grow 71.3% from a year ago. Below is what to expect from the STRL stock.

What the Zacks Model Unveils for Sterling

Our proven model predicts an earnings beat for Sterling for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) for this to happen. This is exactly the case here.

Earnings ESP: STRL has an Earnings ESP of +2.01%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Likely to Shape Sterling’s Q4 Results

Sterling’s fourth-quarter 2025 revenues are expected to have gained year over year on the back of favorable U.S. infrastructure spending and steady public and private investment across transportation, utilities and energy projects. The company is likely to have benefited from easing interest rates, which improved funding visibility and supported new project starts. Strong demand for mission-critical site development, particularly in data centers, e-commerce distribution and industrial facilities, is expected to have aided performance. 

Growth in the E-Infrastructure segment, along with the integration of CEC Facilities Group, is likely to have expanded electrical capabilities and supported execution. A rising backlog and a healthy pipeline are expected to have provided better revenue visibility during the quarter.

Segment-wise, E-Infrastructure Solutions (which accounted for 60% of third-quarter 2025 revenues) is expected to have remained the primary growth driver in the to-be-reported quarter. The segment is likely to have benefited from strong demand for large and complex data center projects, supported by AI-led digital transformation trends. 

Continued momentum in e-commerce distribution and manufacturing facilities is expected to have added support. Expansion into new geographies and efficient project execution are likely to have aided growth. However, higher project complexity and longer permitting timelines might have created some variability in project timing. The Zacks Consensus Estimate for E-Infrastructure Solutions revenues for the to-be-reported quarter is pegged at $425 million, up from $234 million reported a year ago.

The Transportation Solutions segment (which accounted for 25% of total third-quarter 2025 revenues) is expected to have delivered a weaker top-line performance in the fourth quarter. While steady federal infrastructure funding and solid backlog levels are likely to have supported activity in core markets, revenues are expected to have declined. 

However, the planned wind-down of low-bid heavy highway operations in Texas is likely to have weighed on segment revenues, even as it supports a more disciplined and higher-margin project mix. The consensus mark for Transportation Solutions revenues is pegged at $170 million, indicating a decrease of 31.4% year over year.

Sterling’s Building Solutions segment (which accounted for 15% of total third-quarter 2025 revenues) is expected to have faced mixed conditions in the to-be-reported quarter. Residential-related activity is likely to have remained under pressure due to affordability challenges and elevated mortgage rates. 

That said, stable construction activity in key markets such as Dallas, Fort Worth, Houston and Phoenix is expected to have provided some support. The company’s focus on service diversification and operational discipline is likely to have helped limit downside. The consensus mark for Building Solutions revenues is pegged at $103 million, implying an increase of 14.4% year over year.

From a margin perspective, Sterling is expected to have benefited from a higher mix of mission-critical and complex infrastructure projects. Improved execution and disciplined project selection are likely to have supported profitability. However, margin expansion might have been partly constrained by elevated cost inflation, labor availability challenges and competitive bidding on large projects.

STRL Stock’s Price Performance & Valuation

Shares of Sterling have surged 49.4% in the past six months, significantly outperforming the Zacks Engineering – R&D Services industry’s 16.4% growth. The stock has further outperformed the broader Construction sector and the S&P 500, which have advanced 12.2% and 9.1%, respectively, in the same period.

STRL stock has outperformed some other players, including AECOM ACM, Fluor Corporation FLR and KBR, Inc. KBR in the past six months. In the said time frame, Fluor gained 23.8%, while AECOM and KBR lost 20.6% and 15.1%, respectively. Let us look at the factors driving this performance

Sterling’s shares are currently trading at a forward 12-month price-to-earnings (P/E) ratio of 32.8, a 25% premium to the industry average of 26.24.

STRL’s P/E Ratio (Forward 12 Months) vs. Industry

STRL stock also appears overvalued compared with other peer companies. AECOM, Fluor and KBR have a forward P/E of 15.34, 22.08 and 9.97, respectively.

Conclusion: Hold STRL Stock for Now

Sterling is likely to have reported another resilient quarter, supported by steady demand in mission-critical infrastructure markets and disciplined project selection. Strength in the E-Infrastructure business, backed by ongoing data center activity and the integration of CEC, is expected to have supported execution and service expansion. A solid backlog and healthy project pipeline continue to provide revenue visibility.

However, near-term challenges remain, particularly in the Transportation Solutions segment, where revenue moderation and execution-related pressures could weigh on results. Residential softness within Building Solutions may also limit upside. While long-term fundamentals remain intact, these factors suggest a balanced near-term outlook. Investors may consider holding the stock while monitoring execution trends and segment-level performance in upcoming quarters.

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

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