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Sterling Construction (STRL) Q4 Earnings Lag, Revenues Beat

Sterling Construction Co. Inc. STRL reported fourth-quarter 2017 earnings of 11 cents per share, missing the Zacks Consensus Estimate of 13 cents. However, it was reversal from year-ago quarter’s loss of 25 cents per share.
Operational Update
Sales surged 51% year over year to $254 million in the quarter. Revenues beat the Zacks Consensus Estimate of $222 million.
Cost of sales increased 42% year over year to $230 million. Gross profit was $24 million during the quarter, fourfold the $6 million reported in the prior-year quarter. Gross margin was 9.4% compared with 3.8% in the year-ago quarter reflecting significant improvement in heavy civil construction gross margin along with 130 basis points of improvement attributable to the incremental benefit of the acquisition of the residential construction business.
General and administrative expenses increased 32% from the year-ago quarter to $12 million. The company reported an operating income of $7 million in the reported quarter reversing its prior-year quarter’s operating loss of $5.3 million.
Sterling Construction Company Inc Price, Consensus and EPS Surprise
Sterling Construction had cash and cash equivalents of $84 million as of 2017 end, compared with $43 million as of 2016-end. Long-term debt amounted to $86 million as of 2017 end, a substantial increase from $1.5 million as of 2016 end.
Fiscal 2017 Performance
Sterling Construction reported earnings of 43 cents per share in contrast with the loss of 40 cents per share suffered in 2016. Earnings missed the Zacks Consensus Estimate of 45 cents. Fiscal Sales increased 39% year over year to $958 million, ahead of the Zacks Consensus Estimate of $926 million.
Bookings and Backlog
Total backlog was $994.5 million as of Dec 31, 2018, down from $1.04 billion as of Dec 31, 2016. The backlog is comprised of approximately 70% from heavy highway construction projects.
Driven by the current heavy civil backlog, and anticipated project activity on the residential side of the business, the company anticipates revenues in 2018 in the range of $1.0-$1.035 billion. Further, the steady rise in backlog margin along with the strong margins in the residential segment will lead to net income in the range of $23-$26 million, which implies year-over-year EPS growth of over 100%.
Sterling Construction has outperformed the industry it belongs to in the past year. The shares have gained 34.5% compared with growth of 4.9% witnessed by the industry.
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same sector are Boise Cascade Company BCC, EMCOR Group, Inc. EME and Dycom Industries, Inc. DY. While Boise Cascade and EMCOR flaunt a Zacks Rank #1 (Strong Buy), Dycom Industries carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boise Cascade has an expected long-term earnings growth rate of 7%. Its shares have gone up 41% in a year’s time.
EMCOR has an expected long-term earnings growth rate of 15%. Its shares have gone up 23% in a year’s time.
Dycom Industries has an expected long-term earnings growth rate of 12%. Its shares have appreciated 16% over the past year.
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