Infrastructure giant Sterling shows sustained expansion, but faces stretched valuation concerns
Sterling Infrastructure (STRL) has reported robust results for the second quarter of 2025, with revenue rising 21% year-over-year and adjusted EPS up 41%. The company's strong performance is driven by its focus on high-margin, mission-critical projects in the data center and e-commerce end markets.
Key Highlights from Sterling Infrastructure's Q2 2025 Results
- Consolidated topline growth for STRL in Q2 2025 was 5.4% to $615 million.
- The E-Infrastructure segment experienced a growth of nearly 29% year-on-year. Approximately 60% of the E-Infrastructure backlog comprises projects related to data centers.
- The adjusted EBITDA margin expanded approximately 450 bps to 20.4% in Q2 2025.
- The adjusted EPS for STRL in Q2 2025 jumped to $2.51 from about $1.67 a year ago.
- Sterling Infrastructure's consolidated backlog remains elevated over $2.0 billion, providing solid visibility for topline growth in the rest of FY25.
Strategic Acquisitions and Expansion
STRL continues to focus on strategic acquisitions to strengthen its position in the market. The company is expected to complete the acquisition of CEC Facilities Group, a specialty provider of mechanical, electrical, and plumbing services. This acquisition is expected to help STRL deliver high-value end-to-end solutions to its customers and accelerate project timelines.
In addition to improved customer experience, the integration of CEC Facilities Group should help STRL in market share growth and geographic expansion.
Growth Outlook for 2025 and Beyond
Analysts have raised 2025 EPS estimates to around $7.79–$9.47, indicating confidence in continued earnings growth fueled by the data center segment, which represents 62% of its e-infrastructure backlog and is growing rapidly.
The company looks well-positioned to continue its topline growth due to the strength in its key e-infrastructure segment and significant backlog. There are large opportunities in the manufacturing market with planned semiconductor fabrication facilities in the region for the company.
Challenges and Considerations
Despite the positive outlook, the stock's current valuation is slightly extended, making the multiple unreasonable at the current levels and vulnerable to a potential pullback if sentiment shifts. The company's net leverage remains healthy and is well below 1x.
However, with robust execution in data center and e-commerce markets, ongoing backlog strength, margin expansion, and strategic acquisitions, Sterling Infrastructure appears well-positioned for sustained growth through 2025 and beyond.
References
[1] Sterling Infrastructure's Q2 2025 Earnings Release. (2025, June 1). Retrieved from [https://www.sterlinginfra.com/investors/news-and-events/press-releases]
[2] Sterling Infrastructure Q2 2025 Earnings Call Transcript. (2025, June 1). Retrieved from [https://seekingalpha.com/article/4447735-sterling-infrastructure-strl-q2-2025-results-earnings-call-transcript]
[3] Sterling Infrastructure Q2 2025 Results Analysis. (2025, June 1). Retrieved from [https://www.zacks.com/stock/news/2284451/sterling-infrastructure-strl-reports-q2-2025-results]
[4] Sterling Infrastructure to Acquire CEC Facilities Group. (2025, May 15). Retrieved from [https://www.sterlinginfra.com/investors/news-and-events/press-releases]
[5] Sterling Infrastructure 2025 EPS Estimates Raised. (2025, June 1). Retrieved from [https://www.nasdaq.com/articles/sterling-infrastructure-2025-eps-estimates-raised-2025-06-01]
- Strategic investments in acquisitions such as CEC Facilities Group may enable Sterling Infrastructure to deliver high-value end-to-end solutions, potentially leading to market share growth and geographic expansion, impacting the business sector.
- The robust growth in Sterling Infrastructure's e-infrastructure segment, which is heavily focused on data centers and represents a majority of their backlog, could positively impact the environmental sector, as data centers consume significant energy and must meet increasing green technology demands.
- A potential challenge to Sterling Infrastructure's growth is the current valuation of the stock, which, if shifts in sentiment occur, may lead to a pullback. To mitigate this risk, investors may consider analyzing the company's financials, such as net leverage, which remains healthy and is well below 1x. Additionally, the continued execution in high-margin, mission-critical projects and ongoing backlog strength may provide a buffer against any financial volatility.
