Sterling Construction (STRL) Tops Q3 EPS by 9c, Revenues Miss; Offers FY20 Revenue Outlook

Sterling Construction (NASDAQ: STRL) reported Q3 EPS of $0.54, $0.09 better than the analyst estimate of $0.45. Revenue for the quarter came in at $383.5 million versus the consensus estimate of $384.3 million.

Consolidated Third Quarter 2020 Financial Results Compared to Third Quarter 2019:

• Revenues were $383.5 million compared to $291.7 million;
• Gross margin was 13.0% of revenues compared to 10.0%;
• Net Income was $15.2 million compared to $8.0 million;
• EPS was $0.54 compared to $0.30; and,
• EBITDA was $36.7 million compared to $15.4 million.

CEO Remarks and Outlook

“We had another great quarter, nearly doubling our net income year-over-year and further enhancing our financial position through strong free cash flow generation,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “The third quarter was yet another example of the effectiveness of our strategic focus on diversifying into higher margin, higher value add, lower risk work in terms of producing growth in bottom line results. I’d like to thank all of our nearly 3,000 employees for their hard work and dedication to the company throughout this unusual year. Their commitment to our shared vision has enabled us to achieve record results for the first nine months of the year, while at the same time upholding our COVID-19 protocols in order to keep our team safe and healthy.”

“Our Specialty Services segment, which is comprised primarily of our Plateau operations, once again delivered an outstanding bottom line performance reflecting its team’s consistent and highly effective project execution. Plateau continues to enjoy strong backlog given the market demand for their highly specialized capabilities for large distribution and data centers and warehousing customers. Our Residential segment capitalized on the recovery in the Texas home building market and continued its healthy growth, delivering year-over-year improvement in revenues and operating profit. The expansion of our Residential segment into the Houston market is progressing as scheduled and this large metropolitan area is well on its way to becoming a meaningful percentage of our overall slab count. Our Heavy Civil segment results were off modestly from last year’s third quarter due largely to a charge for increased estimated cost to complete the construction of three separate bridges in Texas and a shift in mix in the quarter. We expect to see an improved mix of revenues in the coming quarters as we ramp up on several of the attractive design-build and non-heavy highway projects we’ve booked in recent months,” continued Mr. Cutillo.

“We are very pleased with our liquidity position and cash generation. As of September 30, 2020, we have generated over $90 million of cash flow from operations and have reduced our total debt by $40.4 million (or $67.3 million, net of cash), while investing $20.5 million of capital expenditures, net of proceeds. We remain comfortable with our capital structure and believe that we have more than adequate financial flexibility to pursue new opportunities and continue our profitable growth. We expect to have a further reduction of debt over the balance of 2020, which will allow us to enter 2021 from a position of further improved financial strength,” added Mr. Cutillo.

GUIDANCE:

Sterling Construction sees FY2020 revenue of $1.415-1.43 billion, versus the consensus of $1.43 billion.

Maintains Full Year Revenue and Income Guidance:

• Revenue: $1.415 billion to $1.430 billion.
• Net Income: $41 million to $44 million, excluding acquisition related costs of $1 million to $2 million.
• Expected dilutive average shares outstanding: 28.1 million.

Mr. Cutillo concluded, “Looking ahead, despite the pandemic-related uncertainty persisting in the U.S. economy, we are maintaining our full year 2020 guidance for revenues of between $1.415 billion and $1.430 billion and 2020 net income attributable to Sterling common stockholders of between $41 million and $44 million, excluding acquisition related costs of $1 million to $2 million, compared to $24.5 million of Adjusted Net Income in 2019. We expect our full year 2020 diluted average common shares outstanding to be approximately 28.1 million.”

For earnings history and earnings-related data on Sterling Construction (STRL) click here.

You May Also Be Interested In

• Primoris cuts 2026 outlook on renewables cost overruns, COO exits
• Eva Live forms cybersecurity task force through Eva Defense unit
• Sun Communities names Ileana McAlary as general counsel and EVP