Sterling (NASDAQ:STRL) Reports Sales Below Analyst Estimates In Q4 Earnings
Civil infrastructure construction company Sterling Infrastructure (NASDAQ:STRL) missed Wall Street’s revenue expectations in Q4 CY2024 as sales rose 2.6% year on year to $498.8 million. On the other hand, the company’s full-year revenue guidance of $2.08 billion at the midpoint came in 0.6% above analysts’ estimates. Its non-GAAP profit of $1.46 per share was 10% above analysts’ consensus estimates.
Is now the time to buy Sterling? Find out in our full research report.
Revenue: $498.8 million vs analyst estimates of $531.3 million (2.6% year-on-year growth, 6.1% miss)
Adjusted EPS: $1.46 vs analyst estimates of $1.33 (10% beat)
Adjusted EBITDA: $76.37 million vs analyst estimates of $72.44 million (15.3% margin, 5.4% beat)
Management’s revenue guidance for the upcoming financial year 2025 is $2.08 billion at the midpoint, beating analyst estimates by 0.6% and implying -1.9% growth (vs 7.3% in FY2024)
Adjusted EPS guidance for the upcoming financial year 2025 is $8.15 at the midpoint, beating analyst estimates by 25.4%
EBITDA guidance for the upcoming financial year 2025 is $407.5 million at the midpoint, above analyst estimates of $342.6 million
Operating Margin: 12.5%, in line with the same quarter last year
Free Cash Flow Margin: 31.8%, up from 27.2% in the same quarter last year
Market Capitalization: $3.34 billion
Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ:STRL) provides civil infrastructure construction.
Companies providing engineering and design services boast ever-evolving technical expertise. Compared to their counterparts who manufacture and sell physical products, these companies can also pivot faster to more trending areas due to their smaller physical asset bases. Green energy and water conservation, for example, are current themes driving incremental demand in this space. On the other hand, those providing engineering and design services are at the whim of construction and infrastructure project volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates.
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Sterling grew its sales at an excellent 13.4% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
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Sterling Quarterly Revenue
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Sterling’s annualized revenue growth of 9.3% over the last two years is below its five-year trend, but we still think the results were good and suggest demand was strong.
Sterling Year-On-Year Revenue Growth
This quarter, Sterling’s revenue grew by 2.6% year on year to $498.8 million, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to decline by 2.9% over the next 12 months, a deceleration versus the last two years. This projection doesn’t excite us and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Sterling has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.4%, higher than the broader industrials sector.
Looking at the trend in its profitability, Sterling’s operating margin rose by 5.7 percentage points over the last five years, as its sales growth gave it immense operating leverage.
This quarter, Sterling generated an operating profit margin of 12.5%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Sterling’s EPS grew at an astounding 45.1% compounded annual growth rate over the last five years, higher than its 13.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Sterling Trailing 12-Month EPS (Non-GAAP)
Diving into the nuances of Sterling’s earnings can give us a better understanding of its performance. As we mentioned earlier, Sterling’s operating margin was flat this quarter but expanded by 5.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Sterling, its two-year annual EPS growth of 30.6% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.
In Q4, Sterling reported EPS at $1.46, up from $1.30 in the same quarter last year. This print beat analysts’ estimates by 10%. Over the next 12 months, Wall Street expects Sterling’s full-year EPS of $6.10 to grow 6.4%.
We were impressed by Sterling’s optimistic full-year revenue, EPS, and EBITDA guidance, which beat analysts’ expectations. We were also glad its EBITDA outperformed. On the other hand, its revenue missed significantly. Still, this quarter had some key positives. The stock traded up 2.4% to $119 immediately after reporting.
Sterling may have had a good quarter, but does that mean you should invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
