Sterling Construction (NASDAQ: STRL) reported Q4 EPS of $0.20, $0.03 worse than the analyst estimate of $0.23. Revenue for the quarter came in at $347.23 million versus the consensus estimate of $340.15 million.

CEO Remarks and Outlook

“We are very proud of what we, as a Company, have achieved in such a challenging year,” stated Joe Cutillo, Sterling’s Chief Executive Officer. “With our primary focus on the safety of our people during this pandemic, it is truly amazing how they all came together to deliver another record year. These results are a direct result of our people, our culture and our strategy.”

“Our Specialty Services segment continued its outstanding performance in bottom line results due in large part to consistent and highly effective project execution capabilities. Our Specialty Services backlog remains strong, as market demand for their highly specialized capabilities for large distribution centers, data centers and warehouses continues. Our Residential segment continued its healthy growth and expansion into the Houston market. Operating profit as a percentage of revenue dropped slightly year over year, as a result of second quarter temporary price concessions due to COVID and inflation and availability issues with materials. We were able to recoup the temporary price concessions in late 2020, and began passing on material increases in early 2021. The Texas home building market continues to remain strong. As a matter of fact, in the fourth quarter, we poured more slabs than any quarter in company history; something we view as indicative of continued relocation trends we have been seeing from other states to Texas. Lastly, our Heavy Civil segment operating income was up significantly from last year’s fourth quarter as we continue our shift away from low bid heavy highway projects. Going forward, we expect an improved revenue mix as we progress on the attractive alternative delivery projects we’ve booked in recent quarters,” continued Mr. Cutillo.

“We continue to demonstrate our ability to consistently generate cash. During 2020, we generated $119.3 million of cash flow from operations, and used that cash flow to make debt payments of $77.7 million and invested $30.5 million in capital expenditures, net of proceeds. We believe that we have more than adequate financial flexibility to continue our profitable growth and are in the very early stages of exploring some inorganic growth opportunities, either strategic tuck-in acquisitions, or another business unit that meets our criteria of low risk, high margin, high value add work,” added Mr. Cutillo.

Mr. Cutillo concluded, “Based on the anticipated pandemic recovery in the U.S., our strong Backlog and our view on current booking trends and market strength, we expect to generate full year 2021 revenues of between $1.46 billion and $1.49 billion, with a blended gross margin in the 13% to 14% range. Our expectation for 2021 net income attributable to Sterling common stockholders is between $52 million to $55 million. We expect our full year 2021 diluted average common shares outstanding to be approximately 29.2 million. Our 2021 net income guidance includes an effective income tax rate of approximately 30%.”

“We continue to be optimistic for a new infrastructure bill, but our 2021 outlook does not assume any major positive changes in government investment in infrastructure. We expect our 2021 EBITDA to be $134 million to $144 million. Given our strong operating performance in 2020, the continued vaccine rollout, our cash flow generation and debt reduction, we are very enthusiastic about our prospects for generating additional shareholder value during the full year of 2021.”

GUIDANCE:

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

2021 Full Year Revenue and Income Guidance:

• Revenues: $1.46 billion to $1.49 billion.
• Net Income: $52 million to $55 million.
• Expected dilutive average shares outstanding: 29.2 million.

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