Sterling Raises EPS Guidance: Can Margins Continue to Expand in 2025?

Core Insights - Sterling Infrastructure, Inc. (STRL) has raised its full-year 2025 earnings guidance due to strong profitability and margin expansion in its second-quarter results [2][4][10] Financial Performance - In Q2 2025, adjusted earnings per share (EPS) increased by 41% year over year to $2.69, with gross profit margins expanding by 400 basis points to 23.3%, marking a new high for the company [3][10] - Adjusted EBITDA rose by 35% to $126 million, driven by revenue growth and improved gross margins [3] Strategic Focus - The company's emphasis on high-value projects and a disciplined portfolio mix has been crucial for driving profitability [2][5] - A strategic shift towards higher-margin service offerings, particularly in E-Infrastructure projects like data centers, has contributed to margin expansion [3][5] Guidance and Outlook - The adjusted EPS guidance for 2025 has been raised to a range of $9.21-$9.47, reflecting an 8% increase at the midpoint from previous expectations [4] - Transportation Solutions is also expected to contribute to profitability as resources are reallocated to stronger markets [4][5] Industry Context - Other infrastructure peers, such as EMCOR Group, Inc. and MasTec, Inc., have also reported improved profitability, indicating a broader trend of margin expansion within the industry [6][7][8] - STRL's stock has surged by 40.1% over the past three months, outperforming the Zacks Engineering - R and D Services industry's growth of 6% [9] Valuation Metrics - STRL's stock is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 30.49, indicating a premium compared to industry peers [12] - Earnings estimates for 2025 and 2026 have trended upward, reflecting year-over-year growth of 50.8% and 12%, respectively [13]