Sterling Construction?s Earnings: Solid Results and a Promising Path Ahead

Ticker: STRL | Release Date: March 2, 2020

Sterling Construction Company, Inc. (NasdaqGS: STRL) has unveiled its fourth-quarter and full-year financial results for 2019, and let?s just say, it's looking quite sunny for the construction firm. With a revenue forecast that exceeded expectations and a robust backlog of $1.1 billion, Sterling's performance appears to be more than just a passing cloud.

Financial Highlights

The company reported revenues of $346.5 million for Q4 2019, a significant leap from the $255.2 million recorded in Q4 2018. That?s a year-over-year growth that would make any CFO do a little victory dance.

But it?s not all sunshine and rainbows; gross margin slipped to 9.7% from 11.0%. However, they're not alone in this; industry peers are also grappling with similar pressures. Such fluctuations often come with the territory in the construction sector, where project costs can be as unpredictable as the weather.

EPS and Earnings Surprise

Sterling?s EPS for the quarter came in at $0.36, impacted by a $10.2 million charge related to a claim resolution from a legacy project. Despite this, the company managed to recognize a non-cash income tax benefit of $25.8 million, or $0.92 per diluted share, primarily due to the reversal of their valuation allowance. This surprising turn of events has certainly sweetened the earnings surprise for investors.

Looking Forward

As we step into 2020, Sterling has set an ambitious mid-point guidance calling for a year-over-year growth in revenue and adjusted net income of 23% and 61%, respectively. If they can pull this off, it might just change the way we view the construction industry?s recovery narrative. With a record backlog and a clear strategy, Sterling is positioning itself for a potentially lucrative year ahead.

In an era where construction companies are often seen as lumbering giants, Sterling seems to be proving that agility and responsiveness can yield impressive results. Their focus on profitable projects and strategic acquisitions, like the Plateau acquisition, could serve as a blueprint for others in the sector.

Conclusion

In essence, Sterling Construction's latest earnings reveal a company that is navigating the complexities of the construction market with finesse. While the EPS consensus may have been a bit of a rollercoaster this quarter, the overall trajectory appears promising. If they keep this momentum, investors might want to keep their eyes peeled for Sterling?s next move?after all, in the construction business, the foundation is everything.