Sterling Construction (STRL) Tops Q1 EPS by 16c, Revenues Beat; Reaffirms FY21 Revenues Outlook

Sterling Construction (NASDAQ: STRL) reported Q1 EPS of $0.37, $0.16 better than the analyst estimate of $0.21. Revenue for the quarter came in at $315.3 million versus the consensus estimate of $306.6 million.

Consolidated First Quarter 2021 Financial Results Compared to First Quarter 2020:

• Revenues were $315.3 million compared to $296.7 million;
• Gross margin was 14.3% of revenues compared to 11.9%;
• Operating income was $22.8 million compared to $12.1 million;
• Net Income was $10.6 million compared to $3.1 million;
• EPS was $0.37 compared to $0.11; and,
• EBITDA(1) was $29.9 million compared to $20.3 million.
• CEO Remarks and Outlook

“Our first quarter was an excellent start to the year, even in the face of the weather challenges we encountered across much of our geographic footprint in February,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “We attribute our strong top and bottom line performance to our great team of people and the strategy that we have been implementing over the past several years to diversify our revenue streams and focus on higher margin lower risk opportunities where we can bring our experience and unique skill set to bear in order to bring value to our customers.”

“Once again, our Specialty Services segment was a major contributor to our strong first quarter results. We continued to execute well on our robust pipeline of projects for large, high-profile customers as they develop new distribution centers, data centers and warehouses. Backlog and bidding activity for Specialty Services remains robust, giving us good visibility for the balance of 2021.”

“Our Residential segment turned in an impressively strong performance in the face of the weather-related disruption in Dallas-Fort Worth and Houston. Our Residential operations lost workdays for a substantial portion of February due to historically freezing conditions and still managed to complete a record number of slabs for the quarter, and we’re seeing a similar rate of demand and productivity continuing thus far in the second quarter. First quarter segment margins reflected the impact of supply chain pressures, specifically relating to the cost of concrete, lumber and steel. We are watching these trends closely and have already implemented price increases in the first quarter.”

Mr. Cutillo continued, “Our Heavy Civil revenues are down $8.6 million from the prior year quarter while our operating profit was up $4.7 million in the quarter, reflecting the continued mix shift away from low-bid heavy highway to alternative delivery work, particularly in our Rocky Mountain region. We have been extremely pleased to see the results of our multi-year effort to shift the revenue composition of this segment towards jobs where we can use our extensive experience, assets and skill set to bring more value to our customers and earn higher margins.”

“We continued to strengthen our balance sheet in the first quarter, with cash flow from operations of $38.7 million, which we deployed to pay down $30.5 million of debt and invest $11.2 million in capital expenditures. We expect to further enhance our liquidity position as the year progresses, enabling us to continue to execute on our organic growth strategy while evaluating accretive acquisition opportunities. We are considering acquisition opportunities that could add scale to our existing operations or provide us with a new business segment that would give us access to adjacent markets to our core business. With respect to the sizeable infrastructure bill that has been introduced by the new administration, we are optimistic that increased funding could flow to the states in which we operate at some point over the next 12 to 24 months. Based on the uncertain timing of the infrastructure bill, our 2021 outlook does not assume any major positive changes in government investment in infrastructure. Given our strong start to the year, our robust backlog, our solid execution across all three of our segments, and our very healthy financial position we are increasingly enthusiastic about our prospects for generating additional shareholder value during the full year of 2021.”

Mr. Cutillo concluded, “Due to the strong results of our first quarter, we reaffirm our full-year 2021 guidance and believe that we will be on the higher end of the guidance range.”

GUIDANCE:

Sterling Construction sees FY2021 revenue of $1.46-1.49 billion, versus the consensus of $1.48 billion.

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

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