Loss Widens at Sterling - Analyst Blog

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Sterling Construction Co. Inc. ( STRL ) posted adjusted loss of 28 cents per share in the first quarter of 2013 compared with the prior-year loss of 46 cents a share. The loss per share was wider than the Zacks Consensus Estimate of a loss per share of 10 cents.

Adjusted loss in the quarter excludes revaluation of the liability to non controlling interest owners of 11 cents while there was a benefit of 2 cents in the year-ago quarter. On a reported basis, loss was 39 cents per share in the quarter versus a loss of 44 cents in the year-ago quarter.

Operational Update

Sales increased 12.8% year over year to $111 million in the quarter, exceeding the Zacks Consensus Estimate of $103 million.

Gross profit during the quarter decreased 26% to $1.4 million from $1.8 million in the prior-year quarter. Consequently, gross margin contracted 70 basis points to 1.2% in the quarter, due to the adverse impact of the low margin contracts.

General and administrative expenses surged 25% to $9.6 million, driven by new hires to enhance the leadership of the information systems management team. Operating loss in the reported quarter was $7.9 million compared with $4.5 million in the prior-year quarter.

Bookings and Backlog

Backlog as of Mar 31, 2013 increased to $693 million compared with $656 million as of Dec 31, 2012. During the first quarter, Sterling booked contracts aggregating about $148 million.  

Financial Update

Cash and cash equivalents were $4.1 million as of Mar 31, 2013 compared with $3.1 million as of Dec 31, 2012. Long-term debt amounted to $12.1 million as of Mar 31, 2013, compared with $24.2 million as of Dec 31, 2012. The debt-to-capitalization ratio improved to 5.5% as of Mar 31, 2013 from 10.2% as of Dec 31, 2012. For the first quarter of 2013, capital expenditures fell to $4.9 million compared with $5.9 million in the prior-year quarter.

Outlook

Sterling Construction maintains that its full year 2013 organic revenue growth guidance would be constrained due to concerns regarding government funding. The company also expects improvement in bookings, both in terms of dollars and margins. Gross margin for the year is supposed to expand based on the restart of the operationally challenged projects. General and administrative expense for 2013 is expected to be higher than in 2012, reflecting the investments to create a scalable platform for long-term growth. Capital expenditures are projected to be similar to the 2011 levels.

Houston, Texas-based Sterling Construction is a leading heavy civil construction company engaged in the building and reconstruction of transportation and water infrastructure projects in Texas, Utah, Nev., Ari., Calif. and other states. Its transportation infrastructure projects include highways, roads, bridges and light rail and its water infrastructure projects constitute water, wastewater and storm drainage systems.

Sterling Construction currently retains a Zacks Rank #3 (Hold). Other stocks to consider in the same industry with favorable Zacks Ranks are Primoris Services Corporation ( PRIM ) with a Zacks Rank #1 (Strong Buy), and Orion Marine Group Inc. ( ORN ) and Chicago Bridge & Iron ( CBI ) with a Zacks Rank #2 (Buy).



CHICAGO BRIDGE (CBI): Free Stock Analysis Report

ORION MARINE GP (ORN): Free Stock Analysis Report

PRIMORIS SERVCS (PRIM): Free Stock Analysis Report

STERLING CONSTR (STRL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CBI , ORN , PRIM , STRL

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