Sterling Construction (STRL) Issue Weak Prelim. Q4 Results

Sterling Construction (Nasdaq: STRL) announced that it expects to report revenues for the three months ended December 31, 2014 in the range of $150 million to $155 million. Due primarily to weaker than anticipated revenues in its California, Utah and Hawaii operations, along with a continuation of challenging market conditions in its Texas market, the Company expects to report a pre-tax loss of between $7 million and $8 million for the quarter. Full year 2014 revenues are forecast to be between $669 million and $674 million, resulting in a pre-tax loss of between $9 million and $10 million.

*** The Street sees Q4 revs of $170 million and FY14 revs of $688.6 million. Q4 was also expected to see profit of $0.03 per share.

The Company also reported that due to the fourth quarter loss, Sterling is in breach of one of the three financial covenants contained in its credit facility and is addressing the matter with its lenders.

Fourth quarter 2014 bookings of $146 million were up from $119 million in the fourth quarter of 2013. Total backlog of $764 million at December 31, 2014 was up from $687 million at 2013 year-end, and carries an estimated average gross margin in excess of 6%.

Peter MacKenna, President and Chief Executive Officer of Sterling said, “Results for the final quarter of 2014 were disappointing relative to our expectations back in November. Timing and weather issues impacted some large projects in our Hawaii and California operations, while spot shortages of commodities, over-stretched sub-contractors and vendors, and intense competition for craft labor continued to pressure our Texas operations. With that said, collectively we delivered strong improvement for the full year, with 2014 revenues up approximately 20% over 2013, and 2014 EBITDA of approximately $17 million compared to an EBITDA loss of approximately $50 million in 2013.”

Mr. MacKenna continued, “Looking ahead, we expect continued growth in revenues and EBITDA in 2015, reflecting our robust backlog, the operational enhancements we’ve made over the past two years, and our rigid cost controls. To drive more rapid performance improvement and mitigate the external challenges in Texas, our largest market, effective January 5, 2015 I assumed direct leadership of our Texas Sterling Construction Company (TSC) division. Additionally, we are deploying key personnel from across our organization to TSC’s headquarters to support the management transition and identify and capitalize on opportunities to strengthen this business. As a result, we expect improved financial results for this operation in 2015 and beyond.”

The Company plans to issue results for the fourth quarter and year ended December 31, 2014 on or about March 16, 2015.

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