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Sterling's (STRL) Q4 Earnings Miss, Revenues Beat, Stock Up

Sterling Infrastructure, Inc. STRL reported mixed results wherein earnings missed the Zacks Consensus Estimate but revenues surpassed the same. Both the top and the bottom lines increased year over year on the back of solid E-Infrastructure Solutions segment contribution.

Shares of STRL rose 4.04% in the after-hours trading session on Feb 27. The company noted that the E-Infrastructure business recorded organic growth of 31% in 2022 and the acquisition of Petillo contributed 62% to total revenues. Also, Building Solutions’ operating income improved 13% and Transportation Solutions’ operating income grew 34% from 2021 despite soft revenues.

Looking forward, Joe Cutillo, chief executive officer of Sterling, stated, “We enter 2023 stronger than ever. With our record backlog and strong demand in E-Infrastructure and Transportation Solutions, we are confident in our ability to deliver another year of record earnings and value to our customers and investors.”

Inside the Headlines

Sterling reported earnings per share (EPS) of 66 cents per share, which lagged the consensus estimate of 68 cents by 2.9%. The reported figure however rose 73.7% from 38 cents a year ago.

Sterling Infrastructure, Inc. Price, Consensus and EPS Surprise

Sterling Infrastructure, Inc. Price, Consensus and EPS Surprise
Sterling Infrastructure, Inc. Price, Consensus and EPS Surprise

Sterling Infrastructure, Inc. price-consensus-eps-surprise-chart | Sterling Infrastructure, Inc. Quote

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Quarterly revenues of $448.6 million surpassed the consensus mark of $439 million by 2.2%. The reported figure increased 26.2% from the year-ago level of $355.4 million. The upside was primarily attributable to higher contributions from the E-Infrastructure Solutions segment.

Overall, the company’s gross profit came in at $69 million, reflecting a rise from $52.5 million a year ago. Gross margin expanded 60 basis points (bps) from the year-ago period to 15.4%.

Operating margin of 8.3% rose from 5.6% in the reported period. Adjusted EBITDA for the reported period increased 58% from the prior-year period to $50.1 million.

Sterling’s combined backlog (includes Unsigned Low-bid Awards of $275 million and $22.5 million for 2022-end and 2021-end, respectively) at the end of 2022 was $1.69 billion, up 25% from $1.49 billion at 2021-end.

Segmental Discussion

STRL currently operates in three reportable segments — E-Infrastructure Solutions (55% of revenue), Transportation Solutions (28%) and Building Solutions (17%).

E-Infrastructure Solutions: This segment’s revenues grew 94.4% year over year to $247.3 million in the fourth quarter. Operating income increased 59.4% year over year to $29.8 million. The operating margin contracted 260 bps from the year-ago quarter to 12.1%.

Transportation Solutions: Revenues from this segment declined 15.4% year over year to $126.5 million in the reported quarter. Operating income increased 21.4% year over year to $5.07 million. The operating margin expanded 120 bps to 4% from the year-ago period.

Building Solutions: Segment revenues declined 5% year over year to $74.8 million in the reported quarter. Operating income declined 9.8% from the prior-year quarter to $8.26 million. The operating margin declined 70 bps from the year-ago period’s value of 11.7% to 11%.

Financial Details

As of Dec 31, 2022, cash and cash equivalents totaled $181.5 million compared with $60.9 million at 2021-end. Long-term debt was $398.7 million, down from $428.5 million at 2021-end. Cash flow from operations was $219.1 million for 2022 compared with $158.9 million for 2021.

2022 Highlights

For the year, Sterling reported revenues of $1.8 billion, up 25% from 2021. EPS of $3.16 increased from $2.11 a year ago.  Operating margin of 9% rose from 7.6% in 2022. Adjusted EBITDA of $209.5 million was up an impressive 49% from the 2021 level of $140.9 million.

2023 Guidance

For 2023, the company expects revenue to range from $1.9 billion to $2 billion. The gross margin is anticipated between 15% and 16% and EBITDA between $220 million and $235 million. EPS is expected to be within the range of $3.33-$3.53.

For the year, G&A expenses are likely to be 5% of revenues. The tax rate is expected to be 28-29% while net income is likely to be in the range of $104-$110 million. Shares outstanding are expected to be 31.2 million for 2023.

Zacks Rank & Recent Construction Releases

Sterling currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some recent construction sector releases include:

Owens Corning OC reported impressive results for fourth-quarter 2022. Quarterly earnings and net sales surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.

Despite lower volumes, high costs and unfavorable currency, strong pricing helped OC generate higher earnings.

Masco Corporation MAS reported mixed results for fourth-quarter 2022. The bottom line lagged the Zacks Consensus Estimate and declined on a year-over-year basis due to supply-chain challenges and inflation headwinds.

MAS’ net sales surpassed the consensus mark but declined from the prior-year quarter’s level, thanks to demand softness across the product categories in North America, partially offset by selling price increases.

Armstrong World Industries, Inc. AWI reported mixed results for fourth-quarter 2022, wherein earnings surpassed the Zacks Consensus Estimate and declined on a year-over-year basis.

On the contrary, AWI’s net sales beat the consensus estimate and grew from the prior year on the back of pricing actions undertaken.

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Sterling Infrastructure, Inc. (STRL) : Free Stock Analysis Report

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