Will the CEC Acquisition Strengthen Sterling's Margin Profile in 2026?

Core Insights - Sterling Infrastructure, Inc. (STRL) is enhancing its capabilities through the acquisition of CEC, positioning itself for higher-value opportunities in 2026 [1] - The acquisition aligns with customer demand for integrated solutions, with positive early feedback from customers indicating a strategic fit [1] Financial Performance - In September 2025, CEC contributed $41.4 million in revenues, with adjusted operating margins meeting expectations [2] - The third-quarter backlog reached $2.58 billion, with CEC adding $475 million, indicating strong demand in the E-Infrastructure segment [2] - E-Infrastructure revenues are projected to grow by 30% or more organically in 2025, approaching 50% growth including CEC [4] Market Position and Growth Potential - The company anticipates strong demand in 2026, particularly in the data center market, which supports the pursuit of higher-margin work [3] - Adjusted operating margins for E-Infrastructure are expected to rise to approximately 25% in 2025, up from 23.7% in 2024, indicating a positive margin trajectory [4] Stock Performance and Valuation - STRL shares have increased by 67.7% over the past six months, significantly outperforming the Zacks Engineering - R and D Services industry's decline of 2.4% [5] - Earnings estimates for STRL have been revised upward to $10.43 and $11.95 per share for 2025 and 2026, reflecting year-over-year growth of 71% and 14.6%, respectively [8] - STRL's forward 12-month price-to-earnings (P/E) ratio is currently 28.69, indicating a premium valuation compared to industry peers [12]