Sterling Gains 65% in 3 Months: Should Investors Buy the Stock Now?

Shares of Sterling Infrastructure, Inc. STRL have gained 65.4% over the past three months, outperforming 24.8% growth in the Zacks Engineering - R and D Services industry. The stock has also surpassed the broader Construction sector's increase of 4.2% and the S&P 500 Index’s 3.1% rise during the same period.

This Texas-based e-infrastructure solutions, building solutions and transportation solutions provider is gaining from the E-Infrastructure segment’s stability, strong backlog, inorganic growth efforts and steady bid activity in key transportation markets. However, ongoing market volatility, driven by trade policy uncertainties, inflationary pressures and shifting consumer sentiment, is concerning for its prospects.

STRL Stock’s Past 3 Months’ Price Performance

The STRL stock has outperformed some other players in the past three months, including AECOM ACM, Fluor Corporation FLR and KBR, Inc. KBR. In the said time frame, AECOM, Flour and KBR have gained 14%, 18.9% and 0.9%, respectively.

STRL Stock Trades Above 50 & 200-Day Moving Averages

Technical indicators suggest continued strong performance for Sterling. From the graphical representation given below, it can be observed that STRL stock is trading above both 50 and 200-day simple moving averages, signaling a bullish trend. The technical strength underscores positive market sentiment and confidence in its financial health and prospects.

Let us take a closer look at the factors driving Sterling’s recent gain and what this may signal for the stock going forward.

E-Infrastructure Segment Drives Continued Momentum

Sterling’s E-Infrastructure segment, contributing 44% of total revenues in 2024, remains the company’s largest and most profitable business line. In the first quarter of 2025, revenues in this segment rose 18% over the prior year. The upside was mainly driven by continued demand in the data center market, which increased around 60%, along with its strategic shift toward large mission-critical projects. Mission-critical work, including data centers, represented more than 65% of the segment’s backlog, indicating sustained demand visibility.

Moving forward, the company expects data center demand to remain strong as customers are planning multi-year capital investments and looking to work with reliable partners. For 2025, Sterling expects E-Infrastructure revenue to grow in the mid-to-high teens and adjusted operating profit margins to remain in the mid-20% range.

Strong Backlog Supports Future Growth

The company maintains a solid backlog, providing clear visibility into upcoming work. At the end of the first quarter, the backlog stood at $2.1 billion, a 17% increase year over year on a pro forma basis. The upside was backed by a 27% rise in the E-Infrastructure Solutions backlog, which reached $1.2 billion in the first quarter.

The company expects this strong backlog to support steady earnings growth over the next few years. The company’s multiyear prospect is supported by growth in its pipeline of future phase opportunities linked to current projects. The company achieved $0.75 billion in future phase work in the first quarter of 2025. Including both signed backlog and expected future work, the company now has a line of sight to nearly $2 billion in E-Infrastructure projects.

Inorganic Growth Drives Business Expansion

The company is pursuing growth through acquisitions to strengthen its market position. In the first quarter of 2025, the company completed the acquisition of Drake Concrete, a residential concrete provider in the Dallas-Fort Worth area, for $25 million. This deal broadens Sterling’s geographic reach and customer base. Drake Concrete is expected to add $55 million in revenues and $6.5 million in EBITDA in 2025. Furthermore, the acquisition is expected to support slight revenue growth overall in the Building Solutions segment. 

Going forward, Sterling continues to focus on finding suitable acquisitions to support growth and improve service offerings. The e-infrastructure sector remains a key area for mergers and acquisitions, with opportunities also being explored in the Building Solutions segment.

Transportation Segment Positioned for Profitable Growth

The company expects stable progress in its Transportation business, supported by a strong backlog and steady bid activity as it enters the second half of the federal funding cycle. Strategic downsizing of the low-bid heavy highway business in Texas is moderating revenue and backlog, but is expected to enhance margins. 

For 2025, the company anticipates continued growth in its core Rocky Mountain and Arizona markets. It now expects Transportation Solutions revenue growth in the mid-single digits on a pro forma basis in 2025.

Upward Estimate Revisions for Sterling

Wall Street analysts remain optimistic about STRL’s earnings potential. Over the past 30 days, earnings estimates for 2025 have been revised upward to $8.45 from $8.21, as shown above. The estimated figure indicates growth of 38.5% from that reported a year ago. On the other hand, stocks like AECOM, Flour and KBR’s earnings in the current year are likely to witness an increase of 13.9%, 8.2 % and 15.9%, respectively, year over year.

STRL Stock Trades at a Premium

From a valuation standpoint, the company is currently trading at a premium relative to its industry and historical metrics, with the forward 12-month price-to-earnings (P/E) ratio sitting above the five-year average.
 

Furthermore, STRL also trades higher than some of its industry peers, such as AECOM, Fluor and KBR, which trade at 19.96X, 16.35X and 12.9X, respectively.

Conclusion

Strong demand in the E-Infrastructure segment, a robust backlog, and recent acquisitions support Sterling’s growth prospects. The company expects steady revenue and profit improvements supported by these factors. As Sterling currently carries a Zacks Rank #2 (Buy), upward revisions in earnings estimates reflect growing investor confidence. Based on this, investors may consider this stock attractive. 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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