Key Takeaways Sterling's Building Solutions revenues fell 7.6% in H1 2025 to $199.3M amid housing market weakness.E-Infrastructure backlog rose 44% year over year to $1.2B, led by data centers and manufacturing projects.Service diversification and CEC Facilities acquisition are expected to bolster STRL's long-term prospects.Sterling Infrastructure, Inc. (STRL) operates as a diversified construction solutions provider, with strong positions in civil, specialty services and building segments. Its Building Sol ...

Key Takeaways Sterling's E-Infrastructure backlog jumped 44%, led by mission-critical projects like data centers. Transportation gains from federal funding, while Texas highway wind-down aims to lift profitability. Revenues grew double digits with margins up 400 bps; management raised full-year EPS guidance. As competition intensifies in the construction and infrastructure space, Sterling Infrastructure, Inc. ((STRL) is leaning on scale, execution and diversification to protect its edge. The company has pos ...

Core Insights - Alger Weatherbie Specialized Growth Fund's second-quarter 2025 investor letter highlights the impact of trade policy uncertainty and subsequent market recovery, with the S&P 500 achieving a 10.94% gain by the end of Q2 [1] - Sterling Infrastructure, Inc. (NASDAQ:STRL) is a key holding in the fund, showing significant stock performance with a one-month return of 28.50% and a 52-week gain of 154.79% [2] - The company operates in three main business areas: Transportation Solutions, E-Infrastructure Solutions, and Building Solutions, with the E-Infrastructure segment experiencing rapid growth [3] Company Performance - Sterling Infrastructure, Inc. closed at $371.84 per share on September 23, 2025, with a market capitalization of $11.311 billion [2] - The company reported stronger-than-expected operating results, particularly in the E-Infrastructure and Transportation segments, while Building Solutions slightly underperformed [3] - Management has increased revenue guidance for the full year, citing growth in the backlog of future projects within the E-Infrastructure Solutions segment [3]

Market Overview - U.S. stock markets have experienced a significant bull run since the start of 2023, with major indexes like the Dow, S&P 500, and Nasdaq Composite nearing all-time highs [1] - The S&P 500 and Nasdaq Composite have achieved multiple all-time highs in 2025, while the S&P 400 mid-cap index is up 4.9% year to date, just 4.6% away from its 52-week high [2][9] Mid-Cap Stocks - Investment in mid-cap stocks is recognized as a strong portfolio diversification strategy, combining attributes of both small and large-cap stocks [3] - Mid-cap stocks are less vulnerable to losses during economic downturns due to lower international exposure, and they can outperform small caps in a thriving economy due to established management and market presence [4] Recommended Mid-Cap Stocks - Five mid-cap stocks with favorable Zacks Rank for the remainder of 2025 are Dillard's Inc. (DDS), Sterling Infrastructure Inc. (STRL), StoneX Group Inc. (SNEX), Armstrong World Industries Inc. (AWI), and Watts Water Technologies Inc. (WTS), all rated Zacks Rank 1 (Strong Buy) [5][9] Company Insights Dillard's Inc. (DDS) - Dillard's is enhancing growth through strategic initiatives in both brick-and-mortar and e-commerce, focusing on customer acquisition and retention [8] - The company has a strong financial position with solid liquidity and minimal rent obligations, alongside shareholder-friendly practices like dividends and buybacks [10] - Expected revenue and earnings growth rates for DDS are -0.4% and -15.8%, respectively, for the current year, with a 1.8% improvement in the earnings consensus estimate over the last 30 days [11] Sterling Infrastructure Inc. (STRL) - Sterling Infrastructure provides e-infrastructure, transportation, and building solutions, operating through three segments: E-Infrastructure Solutions, Transportation Solutions, and Building Solutions [12][13][14] - The expected revenue and earnings growth rates for STRL are 6.5% and 56.9%, respectively, for the current year, with a 5.3% improvement in the earnings consensus estimate over the last seven days [15] StoneX Group Inc. (SNEX) - StoneX Group operates a global financial services network, offering execution, post-trade settlement, clearing, and custody services through various segments [16] - The expected revenue and earnings growth rates for SNEX are 4.9% and 21.7%, respectively, for the next year, with a 21.7% improvement in the earnings consensus estimate over the last 60 days [17] Armstrong World Industries Inc. (AWI) - Armstrong World Industries is a leading producer of ceiling systems for construction and renovation, operating in three segments: Mineral Fiber, Architectural Specialties, and Unallocated Corporate [18][19][20] - The expected revenue and earnings growth rates for AWI are 12.2% and 15.1%, respectively, for the current year, with a 0.7% improvement in the earnings consensus estimate over the last 30 days [21] Watts Water Technologies Inc. (WTS) - Watts Water Technologies designs and manufactures water safety and flow control products, reporting under three geographic segments: The Americas, Europe, and APMEA [22] - The expected revenue and earnings growth rates for WTS are 3.9% and 11.3%, respectively, for the current year, with a 0.8% improvement in the earnings consensus estimate over the last seven days [24]

Core Insights - Sterling Infrastructure, Inc. (STRL) is facing challenges due to weakness in the U.S. housing market, leading to a 7.6% year-over-year decline in its Building Solutions segment revenues to $199.3 million in the first half of 2025 [1][9] - The decline in the residential market is being offset by strong growth in the E-Infrastructure Solutions segment, which saw a 24.2% year-over-year increase in revenues to $528.7 million, contributing 51% to total revenues [2][9] - STRL's backlog in the E-Infrastructure Solutions segment increased by 44% year-over-year to $1.2 billion, driven by mission-critical projects such as data centers and manufacturing [2][9] Company Developments - STRL has agreed to acquire CEC Facilities Group, LLC, a specialty electrical and mechanical contractor, expected to close by Q3 2025, which will enhance STRL's capabilities in mission-critical services [3][4] - The acquisition is anticipated to create synergies that will help mitigate the impact of the housing market's softness and improve STRL's prospects [4] Competitive Landscape - STRL faces competition from firms like EMCOR Group and MasTec Inc. in the public infrastructure sector [5] - EMCOR reported Remaining Performance Obligations (RPOs) of $11.91 billion, reflecting 22% organic growth and 32.4% growth including acquisitions [6] - MasTec's backlog reached $16.45 billion, marking a 23.3% year-over-year increase, driven by demand in AI, cloud computing, and data storage [7] Stock Performance and Valuation - STRL's stock has surged 62.5% year-to-date, outperforming the Zacks Engineering - R and D Services industry and the S&P 500 index [8] - The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 29.27, indicating a premium valuation compared to industry peers [10] - Earnings estimates for 2025 and 2026 have trended upward, with projected growth rates of 45.9% and 9.4% year-over-year, respectively [12]

Core Insights - Sterling Infrastructure, Inc. (STRL) reported strong second-quarter 2025 results, with earnings exceeding estimates by 19% and revenues by 10.7% [1] - Adjusted diluted earnings per share increased by 41% year-over-year to $2.69, while revenues rose by 21% [1][2] Financial Performance - The company experienced significant growth in E-Infrastructure Solutions and Transportation Solutions, which compensated for a decline in the Building Solutions segment [2] - Gross margin expanded by 400 basis points to 23%, achieving a new high due to a shift towards higher-margin services [2] - Adjusted EBITDA increased by 35% compared to the prior year [2] Stock Performance - STRL shares gained 51.4% over the past three months, outperforming the Zacks Engineering - R and D Services industry's 11.3% and the S&P 500's 8.8% [5] - The stock has shown a consistent upward trend since the second-quarter results announcement, rising 6.6% [5] E-Infrastructure Solutions - E-Infrastructure Solutions led revenue growth with a 29% increase, doubling data center sales and achieving margins of 28% [8][9] - The backlog for E-Infrastructure reached $1.2 billion, up 44% year-over-year, indicating strong future revenue visibility [10][11] - Data center revenues more than doubled, with e-commerce distribution backlog increasing nearly 700% year-over-year [10] Transportation Solutions - The Transportation Solutions segment backlog stood at $715 million, up 5% year-over-year, with expectations for revenue growth in the low-to-mid teens for 2025 [13][14] - The company is downsizing low-bid heavy highway operations in Texas, which is expected to create a more profitable mix [14] Acquisition Strategy - Sterling is advancing its E-Infrastructure platform through the pending $505 million acquisition of CEC Facilities Group, which will enhance its service offerings [15][16] - The integration is expected to create cross-selling opportunities and expand the company's geographic footprint [16] Analyst Outlook - Earnings estimates for 2025 have been revised upward to $8.90 per share, reflecting a growth of 45.9% year-over-year [17] - STRL is currently trading at a premium compared to its industry peers, with a forward P/E ratio above its five-year average [19][21] Conclusion - The strong second-quarter results, growing backlog, and strategic acquisitions position Sterling for long-term growth [22] - Despite trading at a premium, the stock's performance and favorable growth drivers justify its valuation, making it an attractive option for investors [23]

Financial Data and Key Metrics Changes - Revenue grew by 21% in the quarter, with adjusted earnings per share increasing by 41% to $2.69 and adjusted EBITDA rising by 35% to $126 million [7][8] - Gross profit margin expanded by 400 basis points to 23.3%, and operating cash flow was strong at $85 million [9] - Backlog at the end of the quarter totaled $2 billion, a 24% year-over-year increase [10] Business Line Data and Key Metrics Changes - Infrastructure Solutions revenue grew by 29% year-over-year, with adjusted operating income increasing by 57% and operating margins reaching 28% [11][12] - Transportation Solutions revenue increased by 24%, with adjusted operating profit growing by 78% [13] - Building Solutions segment revenue declined by 1%, with adjusted operating income down by 28% due to challenges in the housing market [14] Market Data and Key Metrics Changes - The data center market was a primary growth driver, with revenue from this market more than doubling year-over-year [12] - E-commerce distribution backlog saw a significant increase of nearly 700% in the quarter [32] - Transportation Solutions backlog was $715 million, reflecting a 5% year-over-year increase but a 17% sequential decline [13] Company Strategy and Development Direction - The company is focused on expanding its geographic footprint and enhancing service offerings through the acquisition of CEC Facilities Group [10][11] - The strategy emphasizes building upon existing strengths in high-margin markets and pursuing attractive growth opportunities [9][10] - The company aims to capture more value across the full life cycle of facilities by integrating services [11] Management's Comments on Operating Environment and Future Outlook - Management remains positive about future growth, particularly in e-infrastructure solutions, anticipating continued demand in data centers [20][22] - The company expects to deliver e-infrastructure revenue growth of 18% to 20% and adjusted operating profit margins in the mid to high 20% range for 2025 [22] - Building Solutions is expected to face challenges in the near term, with a forecasted mid to high single-digit decline in revenue [25] Other Important Information - The company has a strong liquidity position with $699.4 million in cash and a net cash balance of $401.2 million after debt [18] - The guidance for 2025 has been increased, projecting revenue of $2.1 billion to $2.15 billion and adjusted diluted EPS of $9.21 to $9.47 [19] Q&A Session Summary Question: Will significant data center projects land in core markets? - Management believes they are well-positioned for a large percentage of the upcoming data center capital projects [30] Question: Will additional acquisitions be needed for expansion into Texas and the Northwest? - The company plans to pursue both organic growth and potential acquisitions to establish a presence in these markets [34] Question: What is the status of e-commerce opportunities? - Several e-commerce projects are expected to start in the back half of the year, with larger warehouse projects anticipated to provide significant revenue [46] Question: How does the competitive environment look? - The company faces competition primarily from local contractors, but believes its integrated services will provide a competitive edge [61][62] Question: When is the CEC acquisition expected to close? - The acquisition is progressing well, with most licensing and permitting processes underway, but timing is dependent on state agencies [68]

Financial Performance - Q2 2025 - Revenues for Q2 2025 were $614.5 million, compared to $582.8 million in Q2 2024[19] - Net income for Q2 2025 was $71.0 million, compared to $51.9 million in Q2 2024[19] - Adjusted EBITDA for Q2 2025 was $125.6 million, compared to $92.9 million in Q2 2024[44] - Diluted EPS for Q2 2025 was $2.31, compared to $1.67 in Q2 2024[19] Financial Performance - YTD Q2 2025 - Revenues for YTD 2025 were $1.045 billion, compared to $1.023 billion in YTD 2024[21] - Net income for YTD 2025 was $110.5 million, compared to $82.9 million in YTD 2024[21] - Adjusted EBITDA for YTD 2025 was $206.0 million, compared to $154.2 million in YTD 2024[44] - Diluted EPS for YTD 2025 was $3.59, compared to $2.66 in YTD 2024[21] Backlog and Guidance - Total Backlog was $2.01 billion with a 17.8% margin[8, 18] - The company anticipates 2025 EBITDA to be between $406 million and $421 million[31]

Core Insights - Johnson Controls (JCI) reported a revenue of $6.05 billion for the quarter ended June 2025, reflecting a year-over-year decline of 16.3% and an EPS of $1.05 compared to $1.14 a year ago [1] - The reported revenue exceeded the Zacks Consensus Estimate of $5.99 billion, resulting in a surprise of +1.09%, while the EPS also surpassed the consensus estimate of $1.00 by +5% [1] Financial Performance - The company’s net sales in Building Solutions North America reached $4.04 billion, significantly higher than the $3 billion estimated by analysts, marking a year-over-year increase of +39.4% [4] - In the EMEA/LA region, net sales were reported at $1.27 billion, exceeding the average estimate of $1.11 billion, with a year-over-year change of +17.8% [4] - For the Asia Pacific region, net sales amounted to $737 million, surpassing the average estimate of $600.8 million, representing a +28.2% year-over-year increase [4] Stock Performance - Over the past month, shares of Johnson Controls have returned +5.6%, outperforming the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Viewpoint - Sterling Infrastructure, Inc. is set to release its financial results for the second quarter of 2025 on August 4, 2025, after market close, followed by a conference call on August 5, 2025, to discuss the results and outlook for the year [1][2]. Company Overview - Sterling Infrastructure operates through various subsidiaries across three segments: E-Infrastructure, Transportation, and Building Solutions, primarily in the Southern, Northeastern, Mid-Atlantic, Rocky Mountain regions, and the Pacific Islands [4]. - E-Infrastructure Solutions focuses on large-scale site development services for manufacturing, data centers, distribution centers, warehousing, and power generation [4]. - Transportation Solutions encompasses infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, rail, and storm drainage systems [4]. - Building Solutions includes residential and commercial concrete foundations, parking structures, plumbing services, and surveys for new residential builds [4]. - The company emphasizes sustainability and responsible operations to enhance the quality of life for society [4]. Leadership Statement - CEO Joe Cutillo stated that the company builds and services the infrastructure essential for economic functioning, mobility, and national growth [5].