Sterling Infrastructure Inc (STRL) Q4 2024 Earnings Call Highlights: Strong EPS Growth and ...

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Mon, Apr 21, 2025, 1:37 PM 4 min read

Adjusted EPS Growth: 37% for 2024.
Total Revenue Growth: 7% to $2.1 billion for 2024.
Adjusted EBITDA: $320 million, a 23% increase for 2024.
Gross Profit Margin: 20.1% for 2024.
Operating Cash Flow: Nearly $500 million for 2024.
Fourth Quarter Adjusted EPS: $1.46, a 13% increase year-over-year.
Fourth Quarter Revenue Growth: 3% year-over-year.
Fourth Quarter Gross Margin: Exceeded 21%.
Backlog: $1.7 billion at the end of 2024, up 2% year-over-year.
E-Infrastructure Operating Income Growth: 44% for 2024.
E-Infrastructure Operating Margin: 22% for 2024.
Transportation Solutions Revenue Growth: 24% for 2024.
Transportation Solutions Operating Profit Growth: 21% for 2024.
Building Solutions Revenue Growth: 1% for 2024.
Building Solutions Operating Profit Growth: 6% for 2024.
Cash and Debt Position: $664.2 million in cash and $316.3 million in debt at year-end 2024.
2025 Revenue Guidance: $2 billion to $2.15 billion.
2025 Gross Profit Margin Guidance: 21% to 22%.
2025 Adjusted EPS Guidance: $7.90 to $8.40.
2025 Adjusted EBITDA Guidance: $395 million to $420 million.

Warning! GuruFocus has detected 4 Warning Signs with GRP.U.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Sterling Infrastructure Inc (NASDAQ:STRL) achieved a 37% growth in adjusted EPS and a 7% increase in top-line revenue for 2024.
The company's gross profit margin reached 20.1%, surpassing their target, and they generated nearly $500 million in operating cash flow.
The e-infrastructure backlog exceeded $1 billion for the first time, indicating strong future growth potential.
Sterling Infrastructure Inc (NASDAQ:STRL) reported a 44% increase in full-year segment operating income for e-infrastructure, with operating margins reaching 22%.
The company has a strong liquidity position with $664.2 million in cash and a net cash balance of $347.9 million, providing flexibility for future growth opportunities.

Negative Points

Revenue for the year was slightly below the guided range, despite the overall growth.
The transportation solutions backlog decreased by 20% year over year, attributed to the timing of awards.
Building solutions saw a decline in fourth-quarter revenue by 3% and operating income by 17%, impacted by a $1.8 million earnout expense.
The residential slab business experienced a 14% revenue decline, primarily due to softness in the Dallas-Fort Worth market.
The company faces challenges in expanding its geographic footprint for data center projects, which may require costly logistics or strategic acquisitions.

Q & A Highlights

Q: Can you discuss Sterling's ability to bid for new data center projects outside of its typical geographic range and how this affects your M&A plans? A: Joseph Cotillo, CEO: We are seeing increased pressure from customers to expand geographically. While we can leverage some assets in our transportation business to work on data centers in areas like the Rocky Mountains and Texas, it is costlier to ship crews across the country. We are considering acquisitions in these markets to enhance our capabilities. Additionally, we are exploring the possibility of establishing new locations organically to expand our footprint.

Q: What drives the exceptional margins in the e-infrastructure segment, and how sustainable are they? A: Joseph Cotillo, CEO: The high margins are driven by a mix of project size and our execution capabilities. Larger projects offer better margins, and our focus on mission-critical projects like data centers has been beneficial. We are also seeing a pickup in e-commerce activity, which should help maintain or even improve margins as we leverage assets better.

Q: How is Sterling handling the shift away from low-bid work in Texas, and what impact does this have on the transportation segment? A: Joseph Cotillo, CEO: We are strategically moving away from low-bid work in Texas, which will moderate top-line growth but should improve margins. The transportation segment is not significantly impacted by federal funding changes, as projects are already funded. We expect flat revenue but strong profitability growth in this segment.

Q: Are there any changes in the data center market, particularly regarding contractual terms or customer demand? A: Joseph Cotillo, CEO: We are seeing increased demand and more aggressive growth plans from customers, contrary to some market narratives. There are no significant changes in contractual terms, and we continue to see strong opportunities in the data center market, with new players entering the space.

Q: What is the outlook for Sterling's building solutions segment, and how is PPG performing? A: Joseph Cotillo, CEO: We expect a slow first half of the year due to weather impacts but anticipate a stronger second half based on builder projections. PPG had a great year and is off to a good start. We are exploring expansion opportunities, particularly in the Fort Worth area, and see potential for growth in Houston and Phoenix.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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