Can Sterling Continue to Maintain Its 29% EPS Growth in 2025?
Sterling Infrastructure, Inc. STRL has shifted its focus toward large-scale mission-critical projects, including data centers, which are proving incremental for its bottom line and revenue visibility. Supporting this strategic decision of the company is the current favorable market backdrop concerning public infrastructure demand, backed by several government initiatives, namely the Infrastructure Investment and Jobs Act (IIJA), CHIPS Act and Inflation Reduction Act (IRA). This shift toward higher-margin service offerings is boding well for STRL's margin and earnings per share (EPS) growth, as evidenced by the 29.4% year-over-year EPS growth in the first quarter of 2025, alongside its adjusted operating margin expanding 618 basis points.The demand for data center-related projects is currently strong in the market thanks to the ongoing surge in Artificial Intelligence applications and the focus on digital transformation initiatives. STRL highlighted that the mission-critical projects hold the majority of its E-Infrastructure segment's (51% of first quarter 2025 revenue) backlog, with data center-related work accounting for more than 65%. Backed by the robust market trends, the E-Infrastructure segment's backlog grew 27% year over year to $1.2 billion as of the first quarter of 2025, with Sterling finishing the quarter with a total backlog of $2.13 billion.Besides, Sterling's efficient project management skills and ability to complete projects on or before the deadline are acting as a catalyst toward its growth amid the favorable infrastructure spending market backdrop. Owing to these tailwinds, the company raised its 2025 adjusted EPS guidance to be in the range of $8.40-$8.90 from the previously expected range of $7.90-$8.40. The updated values reflect 18.5-25.5% year-over-year growth.
The analysts' sentiments are bullish for Sterling, attributable to increased public infrastructure demand and its ability to capitalize on those opportunities, driving its backlog. For 2025, STRL's earnings estimates have trended upward in the past 60 days to $8.61 per share. The estimated figures reflect 41.2% year-over-year growth. Although the 2026 earnings estimate has been revised downward in the past 60 days to $9.48 per share, the estimated figure indicates 10.1% year-over-year growth.
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Moreover, EPS estimates for the second, third and fourth quarters indicate 35.3%, 32.5% and 43.8% year-over-year growth, respectively. The robust trend indicates that the company will be able to maintain or rather outperform its EPS growth streak for the remainder of 2025.
STRL shares space with renowned market players, including EMCOR Group, Inc. EME and Quanta Services, Inc. PWR, which are also benefiting from the market backdrop of strong public infrastructure demand, especially across data centers, energy infrastructure and power grid modernization.EMCOR is a Connecticut-based mechanical and electrical construction, industrial and energy infrastructure, and building services provider, which is gaining from the growing infrastructural demand across the network and communications sector. For 2025 and 2026, EMCOR's EPS estimates trended upward in the past 60 days by 0.9% to $23.59 and 0.3% to $25.47, indicating 9.6% and 8% year-over-year growth, respectively.Quanta is a Texas-based infrastructure services provider, currently benefiting from its involvement in the advancement and implementation of technology solutions throughout the entire decarbonization spectrum. For 2025 and 2026, Quanta's EPS estimates moved up in the past 60 days by 1% to $10.33 and 0.1% to $11.69, indicating 15.2% and 13.2% year-over-year growth, respectively.
Shares of this Texas-based infrastructure services provider have gained 35.7% so far this year, significantly outperforming the Zacks Engineering - R and D Services industry, the broader Zacks Construction sector, and the S&P 500 index.
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STRL stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 25.32X, as evidenced by the chart below. The overvaluation of the stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up.
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The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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