Markets
RPM

Sterling Construction Tops Earnings, Reverses Year-Ago Loss - Analyst Blog

A generic image of a person holding out their hands
Credit: Shutterstock photo

Sterling Construction Co. Inc. ( STRL ) reported an impressive second-quarter 2014 earnings of 7 cents per share, reversing the prior-year quarter's loss of 93 cents per share. Results also beat the Zacks Consensus Estimate by a penny.

Sterling Construction Company, Inc - Earnings Surprise | FindTheBest

Operational Update

Sales improved 46% year over year to $194.8 million in the quarter, surpassing the Zacks Consensus Estimate of $165 million. The improvement was mainly driven by the completion of major contracts alongwith an increase in projects and process particularly in the Texas and California markets.

Cost of sales increased 21.6% year over year to $182 million. Gross profit during the quarter was $12.5 million, contrary to a loss of $16.6 million in the prior-year quarter, led by improved overall profitability.

General and administrative expenses remained flat at $9.5 million compared with the year-ago quarter. Operating profit in the reported quarter was $2.5 million as against an operating loss of $26 million in the prior-year quarter.

Bookings and Backlog

During the second quarter, bookings were at $167 million, representing a book-to-bill ratio of 0.86:1. As of Jun 30, 2014, total backlog was $727 million, up 5.8% sequentially and 1.8% year over year. The total backlog, however, excluded $116 million of projects where Sterling Construction was apparently a low bidder and was not awarded the contract.

Financial Update

Cash and cash equivalents were $14.3 million as of Jun 30, 2014, compared with $1.9 million as of 2013-end. Long-term debt amounted to $19.6 million as of Jun 30, 2014, compared with $8.3 million as of Dec 31, 2013. The debt-to-capitalization ratio was at 11.9% as of Jun 30, 2014 compared with 6% as of Dec 31, 2013. Capital expenditures for the second quarter were $5.4 million compared with $1.8 million in the second quarter of 2013.

Outlook

Sterling Construction anticipates growth in revenues for the second half of 2014 based on the execution of existing projects and new awards. The company forecasts general and administrative expenses to remain below 6% of revenues.

Further, the company has been effectively implementing its strategy of pursuing smaller projects, alternative delivery projects and opportunities which will drive growth. However, uncertainty regarding the long-term highway bill remains a matter of concern.

Houston, TX-based Sterling Construction is a leading heavy civil construction company engaged in 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 comprise water, wastewater, and storm drainage systems.

Sterling Construction currently carries a Zacks Rank #4 (Sell). However, some better-ranked stocks in the sector include Boise Cascade Company ( BCC ), RPM International Inc. ( RPM ) and Winnebago Industries, Inc. ( WGO ). All these stocks carry a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BOISE CASCADE (BCC): Free Stock Analysis Report

WINNEBAGO (WGO): Free Stock Analysis Report

RPM INTL INC (RPM): Free Stock Analysis Report

STERLING CONSTR (STRL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

RPM BCC STRL WGO

Other Topics

Earnings Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More