Sterling Construction (NASDAQ: STRL) reported Q2 EPS of $0.65, $0.34 better than the analyst estimate of $0.31. Revenue for the quarter came in at $400 million versus the consensus estimate of $329.35 million.

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

• Revenues were $400.0 million compared to $264.1 million;
• Gross margin was 14.9% of revenues compared to 9.7%;
• Net Income was $18.3 million compared to $7.8 million;
• EPS was $0.65 compared to $0.29; and,
• EBITDA was $41.2 million compared to $15.3 million.

CEO Remarks and Outlook

“I am extremely proud of what our employees were able to accomplish in one of the most challenging times in our Company’s history,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “Our bottom-line results were the best ever achieved by the Company, which reflects the benefits of our strategy to transform our business portfolio and our overall project mix towards higher value add, lower risk, and more profitable work. Most importantly, we delivered this performance while maintaining the health and safety of our team across all of our operating geographies, which is a testament to the attentiveness, discipline and professionalism of our nearly 3,000 employees in the face of our nation’s ongoing battle against the COVID-19 pandemic.”

“Our Specialty Services segment, which includes our recent acquisition of Plateau, more than doubled its operating profit relative to the first quarter of 2020. Plateau entered the quarter with record backlog and executed flawlessly for its blue chip customer base. Our Residential segment rebounded from the pandemic-related headwinds of the first quarter, and also solidly outperformed the prior year quarter driven by a faster than anticipated recovery of the Texas housing market and our expansion into the Houston market. Our Heavy Civil business has remained stable as we executed on substantial heavy highway work during the quarter while maintaining our backlog at near record levels. We are yet to see significant project delays or cancellations in the geographies in which we perform heavy civil work and have no reason to anticipate that this will be the case for the foreseeable future. Additionally, as yet, no states in the geographies in which we operate have stopped or reduced project lettings due to funding challenges. In fact, despite the uncertainty and general social and economic disruption caused by the pandemic crisis, we remain optimistic about the outlook for all of our businesses for the balance of the year given our Combined Backlog, the pending new awards we expect to realize in the coming months, and the sizeable quantity of new project opportunities that we’ve identified.”

GUIDANCE:

Sterling Construction sees FY2020 revenue of $1.415-1.43 million, versus the consensus of $1.31 million.

Mr. Cutillo continued, “In addition to record earnings, we further enhanced our liquidity position in the second quarter. We are comfortable with our capital structure which provides us with the financial flexibility to continue to generate profitable growth. For the first six months of 2020 we generated $52.3 million of operating cash flow, an increase of $56.6 million compared to last year. In addition, we reduced our net debt by $36.0 million during the year. We expect to continue paying down debt over the remainder of 2020, putting us in an increasingly strong financial position going into 2021.”

Mr. Cutillo concluded, “Based on our year-to-date performance, the anticipated contribution from Plateau and our record high Combined Backlog and associated margin, along with our view on market strength and diversification of our business, we are providing updated guidance for 2020. We now expect to generate full year 2020 revenues of between $1.415 billion and $1.430 billion. Our expectation for 2020 net income attributable to Sterling common stockholders is between $41 million to $44 million, excluding acquisition related costs of $1 million to $2 million, representing a 73% increase from adjusted net income in 2019. We expect our full year 2020 diluted average common shares outstanding to be approximately 28.0 million. This guidance assumes no significant increase in COVID-19 pandemic impacts on our operations during the remainder of the year. However, with the continuing volatility of the COVID-19 pandemic, significant incremental pandemic impacts could keep us from achieving our 2020 guidance.”

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