Sterling Construction (NASDAQ: STRL) reported Q3 EPS of $0.26, $0.04 better than the analyst estimate of $0.22. Revenue for the quarter came in at $304.2 million versus the consensus estimate of $262.27 million.

CEO Remarks and Outlook:

“The Sterling Team was able to deliver another strong quarter in some very adverse conditions,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “Even with the impact of one of the worst hurricanes in Texas history, we were still able to improve our Heavy Civil performance, and deliver strong top line and bottom line growth in the third quarter to exceed our expectations. In addition to improved Heavy Civil performance, our Residential Construction segment contributed approximately $40 million in revenues as the business completed the highest number of concrete slabs for a single quarter in its history. We also executed well on some large projects in the Rocky Mountain region. The net impact of Hurricane Harvey on our third quarter was not significant as the productivity lost on Gulf Coast projects was largely offset by emergency work that resulted from the storm related flooding. Our backlog decreased compared to the end of the second quarter reflecting the seasonal timing of bidding opportunities, along with the delay of project lettings by TxDOT in the wake of Harvey, coupled with our continued disciplined approach to bidding.”

Mr. Cutillo continued, “We expect our fourth quarter results to remain strong but follow our typical seasonal decline in both our Heavy Civil and Residential Construction businesses. Given our strong year-to-date performance and our expectations for the fourth quarter, we are raising our guidance ranges for full year 2017 as follows:

• Revenues of $915 million to $935 million, from $850 million to $880 million;
• Net income attributable to Sterling common stockholders of $11.0 million to $12.5 million from $9.0 million to $11.0 million.

We expect our full year 2017 average common shares outstanding to be approximately 26.6 million.

“Looking beyond 2017, we expect to benefit from a macro environment that continues to provide a steady stream of heavy civil project opportunities across our geographies. Additionally, for our residential business, we anticipate that the Dallas-Fort Worth Metroplex will continue growing at low double digit percentages and we are on track to begin an expansion of our Residential Construction operations in the Houston market in the first half of 2018. Collectively, we expect these factors to lead to top-line growth in the mid-to-high single digits which, combined with our leveragable cost structure and our shifting mix towards higher margin business should lead to margin expansion and increased cash flow. As a result, we anticipate that our balance sheet will further strengthen, providing us with greater financial flexibility to reinvest in our business and pursue attractive growth opportunities.”

GUIDANCE:

Sterling Construction sees FY2017 revenue of $915-935 million, versus the consensus of $874.77 million.

Consolidated Third Quarter 2017 Financial Results Compared to Third Quarter 2016:

• Revenues were $304.2 million compared to $205.6 million;
• Gross margin was 10.1% of revenues compared to 8.1%;
• Operating income was $12.6 million compared to $3.7 million;
• Net income attributable to Sterling common stockholders was $7.1 million compared to $2.4 million; and,
• Net income per diluted share attributable to common stockholders was $0.26 compared to net income per diluted share of $0.10.

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