Sterling Infrastructure raises 2025 adjusted EPS guidance by 8% amid E-Infrastructure strength and $2B backlog visibility

Earnings Call Insights: Sterling Infrastructure, Inc. (STRL) Q2 2025

Management View

CEO Joseph A. Cutillo expressed enthusiasm over the company’s performance, highlighting continued bottom-line growth “at a rate roughly double top line growth.” Revenue advanced 21% for the quarter, with E-Infrastructure Solutions growing over 29% and Transportation up 24%. Adjusted earnings per share rose 41% to $2.69. Cutillo stated, “Our gross profit margin expanded 400 basis points from the prior year to reach 23.3%. Additionally, operating cash flow generation in the quarter was again very strong at $85 million.”
Backlog reached $2 billion, up 24% year-over-year, with E-Infrastructure Solutions backlog increasing 44% to $1.2 billion. The CEO underscored “multiyear visibility” and noted, “we have visibility into a pool of E-Infrastructure revenue approaching $2 billion.”
Cutillo detailed progress on the planned acquisition of CEC Facilities Group, stating it will “add mission-critical electrical and mechanical services to the Sterling portfolio” and is expected to “allow us to capture even more value across the full life cycle of a facility, accelerate project timelines, create stickier customer relationships and expand our geographic footprint.”
In E-Infrastructure, data center revenue more than doubled year-over-year, with segment operating income up 57% and margins at 28%. Transportation Solutions operating profit grew 78%, while Building Solutions faced a 1% revenue decline and 28% drop in operating income due to housing market softness.
CFO Nicholas M. Grindstaff remarked, “We ended the quarter with a very strong liquidity position, consisting of $699.4 million of cash and debt of $298.2 million for a cash net of debt balance of $401.2 million.”

Outlook

Management raised full-year 2025 guidance to revenue of $2.1 billion to $2.15 billion, net income of $243 million to $252 million, diluted EPS of $7.87 to $8.13, adjusted diluted EPS of $9.21 to $9.47, EBITDA of $406 million to $421 million, and adjusted EBITDA of $438 million to $453 million. Grindstaff stated, “This represents an 8% increase at the midpoint of our previous guidance range” for adjusted EPS and a 6% increase for adjusted EBITDA.
The company expects E-Infrastructure revenue growth of 18% to 20% and adjusted operating profit margins in the mid- to high-20% range for 2025. Transportation Solutions revenue is forecast to grow in the low to mid-teens, with adjusted operating profit margins in the low teens. Building Solutions revenue is anticipated to decline mid- to high-single digits, with adjusted operating margins in the low double digits.

Financial Results

Adjusted EPS came in at $2.69 and adjusted EBITDA at $126 million. Gross profit margin reached 23.3%. Operating cash flow was $85 million for the quarter. Cash flow from operating activities for the first six months of 2025 was $170.3 million. The company did not repurchase shares during Q2, maintaining $85.6 million available under its buyback authorization.
Book-to-burn ratios for Q2 2025 were 0.77x for backlog and 1.03x for combined backlog, with year-to-date ratios at 1.36x and 1.47x, respectively.

Q&A

Michael Louie D DiPalma, William Blair: Asked about the data center market and expansion into Texas and the Northwest. Cutillo responded, “We think we’re positioned extremely well for a large percentage of the data center capital that’s coming out…We are following those customers into some new markets.”
DiPalma also inquired about the timeline for expansion. Cutillo replied, “In Texas, I’d be disappointed if we didn’t have some wins for the end of this year with the bid activity that we’re seeing.”
Brent Edward Thielman, D.A. Davidson: Questioned margin sustainability in E-Infrastructure. Cutillo stated, “We believe very strongly with the backlog we have, the future phases we have and the projects we have on the books, we will continue to expand margins.”
Thielman also asked about Building Solutions. Cutillo indicated, “That market certainly is softer than we would like. The second quarter was slightly softer than what we saw than the first.”
Julio Alberto Romero, Sidoti: Queried about complexity in E-Infrastructure projects. Cutillo responded, “The more complex, the more risk they have, which helps us, right? Our certainty is a critical thing.”
Romero also asked about competition. Cutillo explained, “Our biggest competitor, candidly, is local content…As we look forward, with CEC and continue to add electrical and mechanical capabilities…we really believe we could take months out of the development of this project.”
Adam Robert Thalhimer, Thompson, Davis: Asked about managing mega projects. Cutillo said, “We certainly are getting — we continue to get better at managing that.”

Sentiment Analysis

Analysts were optimistic regarding data center growth and expansion plans, yet raised pointed questions regarding margin sustainability and the softer Building Solutions market. Management conveyed high confidence in prepared remarks, with Cutillo frequently using phrases like “we are very confident” and “we will continue to expand margins,” but adopted a more cautious tone when discussing housing softness.
Compared to the previous quarter, management’s sentiment has become more assertive, especially regarding E-Infrastructure and margin outlook, while analysts’ tone remained constructive but sought clarity on execution and market headwinds.

Quarter-over-Quarter Comparison

The company raised its guidance for revenue and adjusted EPS from the previous quarter. In Q1, guidance for adjusted diluted EPS was $8.40 to $8.90; it now stands at $9.21 to $9.47. Revenue guidance has increased slightly at the midpoint. Management’s confidence regarding E-Infrastructure and Transportation margins is higher, while commentary on Building Solutions remains cautious. Analysts’ focus shifted further toward data center momentum and competitive positioning, with continued attention to housing softness.

Risks and Concerns

Management cited housing affordability as a headwind for Building Solutions, with revenue from the legacy residential business down 11%. There was also mention of the seasonally slower awards in Transportation Solutions and the impact from winding down the Texas low-bid heavy highway operation. The CEC Facilities Group acquisition is pending regulatory approvals, with timing uncertain due to state licensing and permitting processes. Cutillo noted, “We don’t see any major hangups. It’s just really getting…through the process and the time of state and local agencies at this point.”

Final Takeaway

Sterling Infrastructure delivered strong Q2 results supported by robust growth in E-Infrastructure and Transportation segments, driving a rise in full-year guidance. The company emphasized expanding opportunities in data centers and e-commerce, highlighted a substantial and growing backlog, and reaffirmed its strategic focus on high-margin, mission-critical projects. While housing market softness persists, management projects continued margin expansion, geographic growth, and is advancing the acquisition of CEC Facilities Group to further strengthen its end-to-end service capabilities.

Read the full Earnings Call Transcript