How Long Can Sterling Rely on E-Infrastructure Visibility?

Core Insights - Sterling Infrastructure, Inc. (STRL) is experiencing growth due to a strong backlog and expanding pipeline in its E-Infrastructure Solutions segment, with a backlog of $1.2 billion as of March 31, 2025, representing a 27% year-over-year increase [1][9] - The company has reached the high end of its $750 million target for future-phase opportunities, bringing total visibility close to $2 billion [1] - The demand for data-center construction, driven by artificial intelligence (AI), accounts for over 65% of the E-Infrastructure backlog, with revenues from these projects increasing approximately 60% year-over-year [2][9] Company Performance - Sterling expects mid-to-high teens revenue growth for the E-Infrastructure segment in 2025, with operating margins projected in the mid-20% range [4][9] - The company acknowledges potential shifts in customer timelines and funding schedules, emphasizing the importance of maintaining high conversion rates from identified opportunities into booked backlog [3] Industry Trends - Other companies like Comfort Systems USA (FIX) and EMCOR Group, Inc. (EME) are also expanding their presence in digital infrastructure, benefiting from long-term trends in AI-driven construction [5] - Comfort Systems reported a record first-quarter 2025 with earnings up more than 75% and revenues rising 19% year-over-year, with a backlog of $6.9 billion [6] - EMCOR's Remaining Performance Obligations reached $11.75 billion, indicating a 28.1% year-over-year growth, supported by strong public infrastructure spending in the U.S. [7] Stock Performance and Valuation - Sterling's stock has surged 102.4% in the past three months, outperforming the Zacks Engineering - R and D Services industry, which rose 35.6% [8] - The company is currently trading at a price-to-earnings ratio of 24.61X, compared to the industry's average of 21.01X [11] - The Zacks Consensus Estimate for Sterling's EPS indicates year-over-year growth of 41.2% for 2025 and 10.1% for 2026 [13]