Sterling Construction Downgraded to Strong Sell - Analyst Blog


Zacks Investment Research downgraded Sterling Construction Co. Inc. ( STRL ) to a Zacks Rank #5 (Strong Sell) on Mar 25, 2014.

Why the Downgrade?

Sterling Construction reported fourth-quarter adjusted loss of $1.82 per share on Mar 17. Results compared unfavorably with earnings per share of 1 cent in the prior-year quarter as well as the Zacks Consensus Estimate of a loss per share of $1.47.

Sales plunged 20% year over year to $126 million in the quarter, missing the Zacks Consensus Estimate of $158 million by a wide margin. The decline was mainly due to write-downs in the current year on three projects in Texas, awarded prior to 2012, and the impact of weather-related delays and issues with subcontractors on these jobs. In contrast, the prior-year quarter had benefited from the completion of several large projects in Utah, particularly the I-15 CORE  Reconstruction Joint Venture Project.

Sterling Construction expects revenues in 2014 to be higher than 2013 and noted that the loss-making pre-2012 projects will be completed. At the end of first-quarter 2014, the loss-making projects, in aggregate, will be 96% complete. The favorable booking trend is expected to continue both in terms of revenue and gross margin.

Notwithstanding the somewhat improved outlook for 2014, Sterling Construction's poor performance in the fourth quarter of 2013 triggered a downward revision in earnings estimates. In the last 7 days, the Zacks Consensus Estimate for 2014 has plunged 58% to 13 cents per share. For 2015, the Zacks Consensus Estimate has gone down 4% to 53 cents.

Other Stocks to Consider

Some better-performing stocks in the sector include Gibraltar Industries, Inc. ( ROCK ), India Globalization Capital, Inc. ( IGC ) and MasTec, Inc. ( MTZ ). While Gibraltar Industries sports a Zacks Rank #1 (Strong Buy), India Globalization Capital and MasTec hold a Zacks Rank #2 (Buy).


MASTEC INC (MTZ): Free Stock Analysis Report

GIBRALTAR INDUS (ROCK): Free Stock Analysis Report

STERLING CONSTR (STRL): Free Stock Analysis Report

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Zacks Investment Research

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: IGC , MTZ , ROCK , STRL

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