Group 1 - Loomis Sayles Small Cap Growth Fund reported a return of 9.37% in Q2 2025, underperforming the Russell 2000 Growth Index which returned 11.97% due to security selection issues in the information technology and financial sectors [1] - The fund highlighted Sterling Infrastructure, Inc. (NASDAQ:STRL) as a key stock, which had a one-month return of 22.46% and a 52-week gain of 135.21%, closing at $341.10 per share with a market capitalization of $10.407 billion on September 29, 2025 [2] - Sterling Infrastructure, Inc. specializes in e-infrastructure, transportation, and building solutions, experiencing a recovery after a selloff in Q1 2025, with strong performance in its data center business and positive management outlook for the coming years [3] Group 2 - Despite the positive outlook for Sterling Infrastructure, it was noted that the company is not among the 30 most popular stocks among hedge funds, with 25 hedge fund portfolios holding the stock at the end of Q2 2025, down from 30 in the previous quarter [4] - The potential of Sterling Infrastructure as an investment is acknowledged, but it is suggested that certain AI stocks may offer greater upside potential and lower downside risk [4] - Additional insights on Sterling Infrastructure were provided by Alger Weatherbie Specialized Growth Fund, indicating a broader interest in the company's performance [5]

Core Viewpoint - Sterling Infrastructure, Inc. (STRL) is expected to report its second-quarter 2025 results on August 4, with a focus on its performance in e-infrastructure, building solutions, and transportation solutions sectors [1]. Financial Performance - In the last reported quarter, Sterling achieved adjusted earnings per share (EPS) of $1.63, reflecting a 29% year-over-year growth, and adjusted EBITDA increased by 31% to $80 million [2]. - Revenues for the last quarter were $430.9 million, surpassing estimates and showing a 7% growth on a pro-forma basis, despite a reported year-over-year decline due to a joint venture accounting change [2]. - The gross margin expanded by 450 basis points to 22%, indicating operational efficiencies and a favorable project mix [2]. Earnings Estimates - The Zacks Consensus Estimate for the upcoming second-quarter EPS is $2.26, suggesting a 35.3% growth from the previous year, while the revenue estimate is $555.1 million, indicating a 4.8% year-over-year decline [6][7]. - For the full year 2025, STRL is projected to register a 41.2% EPS growth compared to the previous year [5]. Segment Performance - The E-Infrastructure Solutions segment, which accounted for 51% of first-quarter 2025 revenues, is expected to remain a key growth driver, benefiting from stable demand and rising data center activity [11]. - The Transportation Solutions segment, contributing 28% to total revenues, is anticipated to support growth due to a strong backlog and steady bid activity [12]. - The Building Solutions segment, which made up 21% of revenues, is expected to face mixed conditions, with some benefits from recent acquisitions and steady activity in core regions [13]. Market Conditions - The company is likely to experience pressures from residential market softness, inflation, and broader market volatility, which may impact top-line performance [14]. - Despite these challenges, Sterling's focus on high-value infrastructure projects and disciplined project execution is expected to support margin improvement [15]. Stock Performance - Year-to-date, STRL shares have gained 58.8%, outperforming the Zacks Engineering - R and D Services industry and the S&P 500 [16]. - The current forward 12-month price-to-earnings (P/E) ratio for STRL is 29.37, which is a 30.3% premium to the industry average of 22.54 [18]. Strategic Outlook - The company is positioned for growth through 2025, supported by solid execution, a favorable project mix, and a strong backlog, despite anticipated near-term challenges [22].

Financial Data and Key Metrics Changes - Adjusted earnings per share increased by 29% to $1.63, with adjusted EBITDA rising by 31% to $80 million [8][10] - Revenue grew by 7% on a pro forma basis, with gross profit margins expanding over 400 basis points to reach 22% [9][10] - Operating cash flow was strong at $85 million, and backlog totaled $2.1 billion, a 17% year-over-year increase [10][11] Business Line Data and Key Metrics Changes - E Infrastructure Solutions segment revenue grew by over 18%, driven primarily by a 60% increase in the data center market [9][14] - Transportation Solutions revenue increased by 9%, with adjusted operating profit growing by 60% due to strong market demand [14][15] - Building Solutions segment revenue declined by 14%, impacted by affordability challenges in the housing market [15][27] Market Data and Key Metrics Changes - E Infrastructure Solutions backlog reached $1.2 billion, up 27% year-over-year, with significant growth in data center projects [11][12] - Transportation Solutions backlog was $861 million, an 11% year-over-year increase [15] - Overall backlog totaled $2.23 billion, a 21% increase from year-end 2024 [16] Company Strategy and Development Direction - The company remains focused on high-return opportunities and plans to enhance long-term value through strategic acquisitions, particularly in e infrastructure [10][28] - The acquisition of Drake Concrete for $25 million is expected to contribute $55 million in revenue and $6.5 million in EBITDA in 2025 [10] - The company is optimistic about future growth in e infrastructure, anticipating mid to high teens revenue growth and adjusted operating profit margins in the mid-20% range [24][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong backlog and future phase opportunities, despite uncertainties in trade policies and the economy [10][22] - The company is optimistic about the ongoing strength in data center demand and anticipates continued growth in core markets [22][24] - Management noted that while the residential market is currently soft, there is significant pent-up demand that could drive future growth [52][53] Other Important Information - The company expects full-year 2025 revenue guidance to range from $2.05 billion to $2.15 billion, with adjusted diluted EPS guidance of $8.40 to $8.90 [21] - The effective income tax rate for the first quarter was 26.1%, with expectations for the full year to remain around 26% [19] Q&A Session Summary Question: Insights on the 35% of backlog not related to data centers - Management feels positive about the backlog, with steady manufacturing and increasing e-commerce activity contributing to growth [31][32] Question: Exposure to tariffs and cost perspective - Management indicated minimal exposure to tariffs due to fixed pricing in contracts and indexing mechanisms in place [34][35] Question: Drivers of margin performance in Transportation Solutions - Margin improvements are primarily due to a shift towards higher-margin services rather than the low bid strategy [46][47] Question: Comfort in bidding for new projects - Management remains optimistic about bid activity and is focusing on long-term project visibility [50][52] Question: Future infrastructure bill expectations - Management noted positive bipartisan activity in Congress regarding the next infrastructure bill, indicating a proactive approach to future funding [68][70] Question: Capacity constraints related to biopharma projects - Management expressed confidence in handling new projects and indicated readiness to expand capacity if necessary [74][76]