Sterling Construction Co. Inc.
) posted loss of 1 cent per share in the third quarter of 2013,
narrower than the prior-year loss of 6 cents per share as well as
the Zacks Consensus Estimate of a loss per share of 8 cents. Even
though results remained in the red, Sterling fared better when
compared to the loss per share of 93 cents in the second quarter
and 39 cents loss incurred in the first quarter.
Improvements from the first and second quarter were aided by
seasonally stronger revenues as well as improving composition of
backlog, which led to substantial increase in gross profit.
Including the impact of the revaluation of a liability related to
noncontrolling interest owners, quarterly loss was 6 cents per
share compared with loss of 1 cent in the prior-year quarter.
Sales decreased 9% year over year to $186 million in the quarter,
missing the Zacks Consensus Estimate of $205 million. The drop in
revenues was due to the completion of several large projects in
Utah, particularly the $1.1 billion I-15 CORE Reconstruction
Joint Venture Project.
However, on a sequential basis, revenues increased 39.4%,
reflecting gains in backlog in the first half of the year, and
warmer weather in the third quarter, mainly in Utah, Nevada and
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Gross profit during the quarter was $8.3 million compared to
gross profit of $14.1 million in the prior-year quarter. Gross
margin was 4.5% compared to gross margin of 6.9% a year ago, a
240 basis points contraction. Compared to the second quarter of
2013, gross profit improved significantly given that the company
had incurred a gross loss of $16.6 million in the quarter.
General and administrative expenses decreased 20% year over year
to $8.2 million as a result of one-time hiring bonus and
retirement payments for executive management in the prior-year
quarter. Operating income in the reported quarter was $1.5
million compared with operating profit of $4.1 million in the
Bookings and Backlog
Backlog as of Sep 30, 2013 increased to $694 million compared
with $714 million as of Jun 30, 2013. Bookings were $165 million,
up 4.4% year over year and 7.1% sequentially.
Cash and cash equivalents were $5 million as of Sep 30, 2013,
compared with $3.1 million as of Dec 31, 2012. Long-term debt
amounted to $20.6 million as of Sep 30, 2013, compared with $24.2
million as of Dec 31, 2012. The debt-to-capitalization ratio
remained flat at 10% as of Sep 30, 2013 compared with Dec 31,
For the fourth quarter of 2012, Sterling Construction revenues
are expected to be flat year on year. The company also expects
improvement in bookings, both in terms of comparable quarter
growth and profitability.
Sterling Construction expects its current mix of projects in
backlog and the ones that are being targeted to lead to
sustainable gross margin expansion over the coming year. General
and administrative expenses will remain higher due to the ongoing
investments for integration and future growth. It is anticipated
that capital expenditure will be significantly lower as the
current fleet will offer more than adequate capacity to support
growth in 2014 and beyond.
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, Nevada, Arizona, California and other
states. Its transportation infrastructure projects include
highways, roads, bridges and light rail and its water
infrastructure projects constitute water, wastewater and storm
Sterling Construction currently retains a Zacks Rank #3 (Hold).
Jiangsu Expressway Co. Ltd.
) also belongs to the same industry and holds a Zacks Rank #2
One of Sterling Construction's peers
Chicago Bridge & Iron Co.
) reported third-quarter 2013 adjusted earnings of $1.12 per
share, in line with the Zacks Consensus Estimate. Adjusted
earnings improved 33% year over year on the back of strong
project activities during the quarter.
On the other hand, another peer
Granite Construction Inc.
) reported third-quarter 2013 earnings of 28 cents per share, a
70% drop year over year and way behind the Zacks Consensus
Estimate of 78 cents.