Will the CEC Acquisition Push Sterling Into New Growth Markets?

Core Insights - Sterling Infrastructure, Inc. (STRL) is experiencing growth due to strong demand in public infrastructure, particularly in data center construction, AI infrastructure, and utility grid modernization [1] - The company is pursuing inorganic growth through strategic acquisitions, exemplified by its agreement to acquire CEC Facilities Group, LLC, which is expected to enhance its service capabilities [2] Financial Performance - The E-Infrastructure Solutions segment accounted for 51% of Sterling's total revenues, which grew by 24.2% year-over-year to $528.7 million [3] - The backlog for E-Infrastructure Solutions increased by 44% year-over-year to $1.2 billion, driven by mission-critical projects such as data centers and manufacturing [3] Market Position and Competition - The acquisition of CEC Facilities is anticipated to improve revenue visibility and profitability for Sterling, while also allowing entry into new markets [4] - STRL shares have surged by 117.6% over the past six months, outperforming competitors like Quanta Services, Inc. (PWR) and AECOM (ACM), which gained 29.7% and 14.7%, respectively [5][9] Valuation Metrics - Sterling's stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 32.17, indicating a premium compared to industry peers [10] - Quanta Services and AECOM have forward P/E ratios of 33.57 and 20.83, respectively [11] Earnings Estimates - Earnings estimates for STRL have been revised upward for 2025 and 2026, now projected at $8.90 and $9.74 per share, reflecting year-over-year growth of 45.9% and 9.4% [12] - Current quarter and next quarter earnings estimates are $2.72 and $2.10, respectively [13]