Core Insights - The article presents a perspective on investment opportunities in various stocks, emphasizing the author's unique insights and background [1] Company Analysis - The author holds a long position in Amazon (AMZN) through stock ownership, options, or other derivatives, indicating a positive outlook on the company's future performance [2] Industry Overview - The analysis aims to provide informational content for investors, highlighting the importance of conducting personal research and due diligence before making investment decisions [3]

Market Overview - Major U.S. stock indices ended May 13 on a higher note due to easing trade tensions between the U.S. and China, along with softer-than-expected inflation data [1] - The two nations agreed to a 90-day tariff pause, which has contributed to increased investor optimism [1] Investment Strategy - Positive market sentiment may encourage investors to trade on Wall Street, but the sustainability of this rebound is uncertain due to the temporary nature of the tariff pause and changing global market dynamics [2] - To mitigate potential losses during market turmoil, it is advisable to select low-leverage stocks such as 1st Source (SRCE), Kingstone Companies (KINS), MasTec (MTZ), Dorman Products (DORM), and Sterling Infrastructure, Inc. (STRL) [2] Understanding Leverage - Leverage refers to the practice of borrowing capital for operations and expansion, typically through debt financing [4] - Excessive debt financing can lead to significant losses, making it crucial for investors to avoid companies with high debt levels [5] Debt-to-Equity Ratio - The debt-to-equity ratio is a key metric for assessing a company's financial risk, with a lower ratio indicating better solvency [7] - Companies with high debt-to-equity ratios may face challenges during economic downturns, despite strong earnings growth [8] Stock Selection Criteria - Stocks should have a debt-to-equity ratio lower than the industry median, a current price of at least $10, and an average 20-day trading volume of 50,000 or more [11] - Additional criteria include a percentage change in EPS greater than the industry median, a VGM Score of A or B, estimated one-year EPS growth greater than 5%, and a Zacks Rank of 1 or 2 [12] Company Highlights - **1st Source (SRCE)**: A bank holding company with a net income of $37.52 million for Q1 2025, up 27.38% year-over-year, and a return on average assets of 1.72% [14][15] - **Kingstone Companies (KINS)**: A property and casualty insurance holding company with a 51% year-over-year increase in net premium earned and a 125% surge in EPS for Q1 2025 [16][17] - **MasTec (MTZ)**: An infrastructure construction company with a 6% year-over-year revenue increase and a projected 54.9% improvement in earnings for 2025 [18] - **Dorman Products (DORM)**: A supplier of automotive replacement parts with an 8.3% increase in net sales and a 54% rise in adjusted EPS for Q1 2025 [19][20] - **Sterling Infrastructure (STRL)**: A company specializing in E-Infrastructure and building solutions, reporting a 7% revenue increase and a 29% surge in adjusted EPS for Q1 2025 [21]

Core Insights - Sterling Infrastructure, Inc. (STRL) reported strong first-quarter 2025 earnings with adjusted EPS of $1.63, reflecting a 29% year-over-year growth and beating consensus estimates [1] - Adjusted EBITDA increased by 31% to $80 million, driven by improved margins and disciplined project execution [1] - Revenue reached $430.9 million, growing 7% on a pro forma basis despite a reported year-over-year decline due to a joint venture accounting change [1] - The gross margin expanded by 450 basis points to 22%, indicating operational efficiencies and a favorable project mix [1] - The company reported strong operating cash flow of $85 million and continued capital deployment, including a $25 million acquisition of Drake Concrete [1] Financial Performance - STRL's stock gained 7.3% post-earnings release, outperforming the Zacks Engineering - R and D Services industry (up 1.8%) and the broader Zacks Construction sector (up 0.4%) [2] - The stock is currently trading at a 13.7% discount to its 52-week high of $206.07 and a premium of 90.1% to its 52-week low of $93.50 [2] - STRL is trading above its 200-day and 50-day simple moving averages, indicating positive momentum [3] Growth Drivers - The E-Infrastructure Solutions segment was the primary growth driver, recording 18% revenue growth and a 61% increase in operating income in Q1 [6] - The data center market surged approximately 60% year-over-year, now constituting over 65% of the E-Infrastructure backlog, driven by AI-related computing demand [6] - The company's focus on mission-critical, large-scale projects has provided a competitive edge, with a 618 basis point margin expansion in the E-Infrastructure segment [7] Backlog and Future Opportunities - The total backlog at the end of Q1 2025 reached a record $2.13 billion, up 26% from the end of 2024, with E-Infrastructure accounting for $1.22 billion [8] - Sterling reported $750 million in future phase opportunities, indicating strong continuity of project work [8] - In Transportation Solutions, backlog increased to $861 million, up 11% on a pro forma basis, suggesting ongoing strength in infrastructure spending [9] Strategic Initiatives - The company is optimizing its project mix by reducing exposure to low-bid, heavy highway work and reallocating resources to high-value projects [10] - In E-Infrastructure, Sterling employs a phase-by-phase pricing model to maintain profitability during volatile commodity cycles [11] - The acquisition of Drake Concrete is expected to contribute $55 million in revenues and $6.5 million in EBITDA in 2025, diversifying customer concentration [13] Market Position and Valuation - STRL has consistently surpassed profit estimates, with an average earnings surprise of 11.5% [15] - The company is currently trading at a premium relative to its industry and historical metrics, with a forward 12-month P/E ratio above its five-year average [16] - STRL's P/E ratio is higher than Dycom but lower than Construction Partners and Comfort Systems USA [17] Investment Outlook - Sterling presents a compelling buy opportunity backed by strong fundamentals, consistent execution, and robust sector tailwinds [20] - The company’s E-Infrastructure segment is the core growth engine, with a record backlog providing long-term revenue clarity [21] - With a 6.6% stock gain post-earnings and upward estimate revisions for 2025 EPS growth of 38.5%, STRL stands out as a strong growth candidate in the mid-cap infrastructure space [22]

Company Overview - Sterling Infrastructure (STRL) currently holds a Momentum Style Score of B and a Zacks Rank of 2 (Buy) [3][4] - The company has shown significant price performance, with shares up 37.91% over the past quarter and 43.35% over the last year [7] Price Performance - STRL shares increased by 9.15% over the past week, outperforming the Zacks Engineering - R and D Services industry, which rose by 0.59% [6] - The monthly price change for STRL is 35.5%, compared to the industry's 4.78% performance [6] Trading Volume - The average 20-day trading volume for STRL is 1,059,492 shares, indicating a bullish sign for the stock [8] Earnings Outlook - Over the past two months, one earnings estimate for STRL has moved higher, while none have moved lower, increasing the consensus estimate from $8.21 to $8.45 [10] - For the next fiscal year, one estimate has also moved upwards with no downward revisions [10]

Financial Data and Key Metrics Changes - Adjusted earnings per share increased by 29% to $1.63, with adjusted EBITDA rising by 31% to $80 million [8][10] - Revenue grew by 7% on a pro forma basis, with gross profit margins expanding over 400 basis points to reach 22% [9][10] - Operating cash flow was strong at $85 million, and backlog totaled $2.1 billion, a 17% year-over-year increase [10][11] Business Line Data and Key Metrics Changes - E Infrastructure Solutions segment revenue grew by over 18%, driven primarily by a 60% increase in the data center market [9][14] - Transportation Solutions revenue increased by 9%, with adjusted operating profit growing by 60% due to strong market demand [14][15] - Building Solutions segment revenue declined by 14%, impacted by affordability challenges in the housing market [15][27] Market Data and Key Metrics Changes - E Infrastructure Solutions backlog reached $1.2 billion, up 27% year-over-year, with significant growth in data center projects [11][12] - Transportation Solutions backlog was $861 million, an 11% year-over-year increase [15] - Overall backlog totaled $2.23 billion, a 21% increase from year-end 2024 [16] Company Strategy and Development Direction - The company remains focused on high-return opportunities and plans to enhance long-term value through strategic acquisitions, particularly in e infrastructure [10][28] - The acquisition of Drake Concrete for $25 million is expected to contribute $55 million in revenue and $6.5 million in EBITDA in 2025 [10] - The company is optimistic about future growth in e infrastructure, anticipating mid to high teens revenue growth and adjusted operating profit margins in the mid-20% range [24][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong backlog and future phase opportunities, despite uncertainties in trade policies and the economy [10][22] - The company is optimistic about the ongoing strength in data center demand and anticipates continued growth in core markets [22][24] - Management noted that while the residential market is currently soft, there is significant pent-up demand that could drive future growth [52][53] Other Important Information - The company expects full-year 2025 revenue guidance to range from $2.05 billion to $2.15 billion, with adjusted diluted EPS guidance of $8.40 to $8.90 [21] - The effective income tax rate for the first quarter was 26.1%, with expectations for the full year to remain around 26% [19] Q&A Session Summary Question: Insights on the 35% of backlog not related to data centers - Management feels positive about the backlog, with steady manufacturing and increasing e-commerce activity contributing to growth [31][32] Question: Exposure to tariffs and cost perspective - Management indicated minimal exposure to tariffs due to fixed pricing in contracts and indexing mechanisms in place [34][35] Question: Drivers of margin performance in Transportation Solutions - Margin improvements are primarily due to a shift towards higher-margin services rather than the low bid strategy [46][47] Question: Comfort in bidding for new projects - Management remains optimistic about bid activity and is focusing on long-term project visibility [50][52] Question: Future infrastructure bill expectations - Management noted positive bipartisan activity in Congress regarding the next infrastructure bill, indicating a proactive approach to future funding [68][70] Question: Capacity constraints related to biopharma projects - Management expressed confidence in handling new projects and indicated readiness to expand capacity if necessary [74][76]

Financial Performance - Revenues for Q1 2025 were $430.9 million, a decrease from $440.4 million in Q1 2024; excluding $38.5 million of RHB revenue from Q1 2024, revenues increased by $29.1 million[85]. - Gross profit for Q1 2025 was $94.8 million, an increase of $17.9 million or 23.3% compared to Q1 2024, with a gross margin of 22.0%[86]. - Total revenues for Q1 2025 were $430.9 million, a decrease of 2.3% compared to $440.4 million in Q1 2024[94]. - Total operating income for Q1 2025 was $56.1 million, representing 13.0% of revenue, compared to $42.1 million, or 9.6% of revenue, in Q1 2024[94]. - General and administrative expenses increased to $34.6 million, or 8.0% of revenue, in Q1 2025 from $27.3 million, or 6.2% of revenue, in Q1 2024[88]. - Net cash provided by operating activities was $84.9 million in Q1 2025, up from $49.6 million in Q1 2024[101]. - Net cash used in investing activities was $54.2 million in Q1 2025, primarily driven by $37.9 million for acquisitions[103]. - The effective income tax rate for Q1 2025 was 26.1%, with an anticipated full-year rate of approximately 26%[91][92]. - As of March 31, 2025, the company held cash and cash equivalents of $638.6 million[101]. Backlog and Awards - Backlog as of March 31, 2025, was $2.13 billion, up from $1.69 billion at December 31, 2024, with a book-to-burn ratio of 2.2X[83]. - The margin in Backlog increased to 17.7% at March 31, 2025, from 16.7% at December 31, 2024, driven by a greater mix of E-Infrastructure Solutions[83]. - Unsigned Awards were $103.2 million at March 31, 2025, down from $137.9 million at December 31, 2024; Combined Backlog totaled $2.23 billion[84]. Segment Performance - E-Infrastructure Solutions segment revenues increased by $33.8 million, or 18.3%, to $218.3 million in Q1 2025[95]. - Transportation Solutions segment revenues decreased to $120.7 million in Q1 2025 from $149.0 million in Q1 2024, but increased by $10.2 million when excluding prior year RHB revenue[97]. - Building Solutions segment revenues decreased by $14.9 million, or 13.9%, to $92.0 million in Q1 2025 due to lower commercial volume[99]. Strategic Initiatives - The Drake Acquisition for $25 million in cash plus a four-year earn-out opportunity strengthens the company's presence in the Dallas-Fort Worth market[76]. - The Infrastructure Investments and Jobs Act (IIJA) provides approximately $643 billion in funding for transportation programs, significantly increasing funding levels for the next five years[79]. - E-Infrastructure Solutions is expected to see growth driven by investments in data centers and advanced manufacturing, with a recovery in e-commerce distribution sector activity noted[78]. - Building Solutions segment is experiencing a decline due to interest rate uncertainty and affordability challenges, but long-term growth is anticipated due to population growth and housing shortages[81]. - The company aims to improve margins across all segments while focusing on growth in E-Infrastructure Solutions and expanding market share in Building Solutions[77].

Financial Data and Key Metrics Changes - Adjusted earnings per share increased by 29% to $1.63, with adjusted EBITDA rising by 31% to $80 million [7] - Revenue grew by 7% on a pro forma basis, with gross profit margins expanding over 400 basis points to reach 22% [7][15] - Operating cash flow was strong at $85 million, compared to $49.6 million in the prior year [18] Business Line Data and Key Metrics Changes - E Infrastructure Solutions segment revenue grew by over 18%, driven primarily by a 60% increase in the data center market [7][12] - Transportation Solutions revenue increased by 9%, with adjusted operating profit growing by 60% due to strong market demand [12][13] - Building Solutions segment revenue declined by 14%, impacted by affordability challenges in the housing market [13] Market Data and Key Metrics Changes - Backlog at the end of the quarter totaled $2.1 billion, a 17% year-over-year increase on a pro forma basis [9] - E Infrastructure Solutions backlog was $1.2 billion, up 27% year-over-year [10] - Transportation Solutions backlog was $861 million, an 11% year-over-year increase [13] Company Strategy and Development Direction - The company remains focused on pursuing high-return opportunities and enhancing long-term value [8] - The acquisition of Drake Concrete for $25 million is expected to contribute $55 million in revenue and $6.5 million in EBITDA in 2025 [8] - The company is prioritizing e infrastructure for M&A opportunities, particularly in Texas, to capitalize on the growing market [54] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong multiyear opportunities in various markets despite uncertainties in trade policies and the economy [8][20] - The company anticipates continued growth in e infrastructure revenue in the mid to high teens and adjusted operating profit margins in the mid-20% range for 2025 [22] - Management noted that the residential market is currently soft but expects pent-up demand to drive recovery in the long term [48] Other Important Information - The company ended the quarter with a strong liquidity position, consisting of $638.6 million in cash and $310 million in debt [18] - Full year 2025 guidance includes revenue of $2.05 billion to $2.15 billion and adjusted EBITDA of $410 million to $432 million [19] Q&A Session Summary Question: Insights on the 35% of backlog not related to data centers - Management feels confident about the backlog, with steady manufacturing and increasing e-commerce activity contributing positively [28][30] Question: Exposure to tariffs and cost perspective - Management indicated minimal exposure to tariffs due to fixed pricing in contracts and indexing mechanisms in place [31][34] Question: Drivers of margin performance in Transportation Solutions - Margin improvement is primarily driven by a shift towards higher-margin services rather than the low bid strategy [42] Question: Comfort in bidding for new projects - Management remains optimistic about bid activity and backlog, focusing on long-term growth despite current softness in the residential market [48] Question: M&A priorities in e infrastructure - The company is looking for geographic expansion and additional services, particularly in Texas, to enhance its portfolio [54][56] Question: Expectations for the next infrastructure bill - Management noted positive bipartisan activity in Congress regarding the next infrastructure bill, indicating a proactive approach to future funding [63][66] Question: Capacity constraints related to biopharma projects - Management is confident in handling new projects and is prepared to increase capacity if necessary [70][72]

Core Viewpoint - Sterling Infrastructure (STRL) reported quarterly earnings of $1.63 per share, exceeding the Zacks Consensus Estimate of $1.58 per share, and showing an increase from $1 per share a year ago, indicating a positive earnings surprise of 3.16% [1] Financial Performance - The company achieved revenues of $430.95 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 3.69%, although this represents a decline from year-ago revenues of $440.36 million [2] - Over the last four quarters, Sterling Infrastructure has consistently surpassed consensus EPS estimates, achieving this four times [2] Stock Performance - Since the beginning of the year, Sterling Infrastructure shares have decreased by approximately 1.7%, while the S&P 500 has declined by 3.3%, indicating relative outperformance [3] Future Outlook - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the upcoming quarter is $2.14 on revenues of $535.3 million, and for the current fiscal year, it is $8.21 on revenues of $2.03 billion [7] Industry Context - The Engineering - R and D Services industry, to which Sterling Infrastructure belongs, is currently ranked in the top 15% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

First Quarter 2025 Financial Highlights - Revenues for Q1 2025 were $430.9 million[18], compared to $440.4 million in Q1 2024[19] - Net Income for Q1 2025 was $39.5 million[18], compared to $31.0 million in Q1 2024[19] - Adjusted EBITDA for Q1 2025 was $80.3 million[18], compared to $61.3 million in Q1 2024[41] - Diluted EPS for Q1 2025 was $1.28[18], compared to $1.00 in Q1 2024[19] - Cash & Cash Equivalents at the end of Q1 2025 was $638.6 million[18] - Backlog was $2.13 billion with a 17.7% margin[18] Segment Performance (Q1 2025) - E-Infrastructure Solutions revenue was $218.3 million with an operating margin of 21.4%[19] - Transportation Solutions revenue was $120.7 million with an operating margin of 9.3%[19] - Building Solutions revenue was $92.0 million with an operating margin of 13.4%[19] Full Year 2025 Guidance - The company expects revenue between $2.05 billion and $2.15 billion[36] - The company expects Diluted EPS between $7.15 and $7.65[36] - The company expects Adjusted Diluted EPS between $8.40 and $8.90[36] - The company expects EBITDA between $381 million and $403 million[29] - The company expects Adjusted EBITDA between $410 million and $432 million[36]

Financial Performance - First quarter 2025 revenue was $430.9 million, a 7% increase on a pro forma basis excluding RHB[6] - Adjusted net income for the first quarter increased by 28% to $50.2 million, resulting in adjusted diluted EPS of $1.63[6] - Total revenues for the three months ended March 31, 2025, were $430,949,000, up from $401,896,000 in 2024, reflecting a growth of 7.2%[34] - Adjusted EBITDA for the three months ended March 31, 2025, was $80,304,000, compared to $61,294,000 in 2024, indicating a 31% increase[32] - The company reported a net income attributable to Sterling common stockholders of $257 million for 2024, with guidance for 2025 set between $222 million and $239 million[38] Revenue Segments - E-Infrastructure Solutions revenue grew by 18%, contributing to a 61% increase in adjusted operating income, with adjusted operating margins expanding to 23.2%[7] - Transportation Solutions revenue increased by 9%, with adjusted operating income growing by 60%[8] - Building Solutions revenue declined by 14%, impacted by a slowdown in the housing market and severe weather conditions[9] - The E-Infrastructure Solutions segment generated revenues of $218,263,000, accounting for 51% of total revenues, up from $184,476,000 (46%) in 2024[34] Guidance and Projections - The company raised its full-year 2025 guidance, projecting 12% revenue growth and 22% adjusted diluted EPS growth[9] - The company provided full-year 2025 guidance for net income attributable to Sterling common stockholders between $222,000,000 and $238,700,000, compared to $257,461,000 in 2024[36] - Adjusted net income attributable to Sterling common stockholders for 2025 is projected to be between $261,718,000 and $278,418,000, compared to $220,745,000 in 2024[36] - Full Year 2025 EBITDA guidance is projected between $381 million and $403 million, compared to actual EBITDA of $411 million for 2024[38] Backlog and Demand - The company ended the quarter with a backlog of $2.1 billion, representing a 17% increase year-over-year[5] - The company reported a book-to-burn ratio of 2.2x for the quarter, indicating strong demand for future projects[5] - The backlog excluding RHB at the end of 2024 was $1.693 billion, showing a decrease from $1.824 billion at the beginning of the year[42] - The combined backlog excluding RHB was $1.831 billion at the end of 2024, compared to $1.891 billion at the beginning of the year[42] Cash Flow and Assets - Cash flows from operations totaled $84.9 million, with cash and cash equivalents at $638.6 million as of March 31, 2025[6] - Cash flows from operating activities for the three months ended March 31, 2025, were $84,883,000, significantly higher than $49,591,000 in 2024, marking a 71% increase[28] - Total assets increased to $2,034,539,000 as of March 31, 2025, from $2,016,774,000 at the end of 2024[26] - Total liabilities rose to $1,207,612,000 as of March 31, 2025, compared to $1,190,296,000 at the end of 2024[26] Stock and Acquisitions - The acquisition of Drake Concrete is expected to contribute approximately $55 million in revenue and $6.5 million in adjusted EBITDA in 2025[4] - The company repurchased $43,846,000 of common stock during the three months ended March 31, 2025[28] - Non-cash stock-based compensation for 2024 was $19 million, with a forecast of $23 million for 2025[38] - The company incurred acquisition-related costs of $421,000 in 2024, with no such costs projected for 2025[40] Other Notable Information - The company plans to report RHB's operating income as a single line item starting January 1, 2025, following its deconsolidation[40]