Sterling Infrastructure, Inc. (STRL) Bundle
Understanding Sterling Infrastructure, Inc. (STRL) Revenue Streams
Understanding Sterling Infrastructure, Inc.’s Revenue Streams
Sterling Infrastructure, Inc. operates through three primary segments: E-Infrastructure Solutions, Transportation Solutions, and Building Solutions. Each segment contributes differently to the company’s overall revenue.
Breakdown of Primary Revenue Sources
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | 9 Months Ended Sep 30, 2024 Revenue (in millions) | 9 Months Ended Sep 30, 2023 Revenue (in millions) | Percentage Change (Q3 2024 vs Q3 2023) | Percentage Change (9 Months 2024 vs 2023) |
|---|---|---|---|---|---|---|
| E-Infrastructure Solutions | $263.9 | $253.9 | $689.7 | $719.9 | 3.9% | -4.2% |
| Transportation Solutions | $227.3 | $192.0 | $609.0 | $455.2 | 17.7% | 33.8% |
| Building Solutions | $102.6 | $113.4 | $318.2 | $311.1 | -9.5% | 2.3% |
Year-over-Year Revenue Growth Rate
In the third quarter of 2024, the total revenue reached $593.7 million, an increase of $33.4 million, or 6.0%, compared to $560.3 million in Q3 2023. For the nine months ended September 30, 2024, total revenue was $1.62 billion, reflecting an increase of $130.7 million, or 8.8%, from $1.49 billion in the same period of 2023.
Contribution of Different Business Segments to Overall Revenue
The contributions to overall revenue from each business segment for the nine months ended September 30, 2024, are as follows:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| E-Infrastructure Solutions | $689.7 | 43% |
| Transportation Solutions | $609.0 | 37% |
| Building Solutions | $318.2 | 20% |
Analysis of Significant Changes in Revenue Streams
Transportation Solutions showed a significant increase in revenue, up 33.8% for the first nine months of 2024 compared to the previous year. This growth was driven by higher revenues from heavy highway, aviation, and other non-highway services. Conversely, E-Infrastructure Solutions experienced a decrease of 4.2% for the nine months, primarily due to timing issues with advanced manufacturing projects and lower volumes from warehouses.
Building Solutions faced challenges, with a 9.5% decline in Q3 2024 compared to Q3 2023, attributed to a slowdown in the Dallas market affecting residential slabs and commercial volume. However, the segment still saw a modest increase of 2.3% for the nine months ended September 30, 2024, largely due to the acquisition of a plumbing business in Texas.
The overall revenue performance indicates a strong reliance on the Transportation Solutions segment while highlighting the volatility in the E-Infrastructure and Building Solutions segments.
A Deep Dive into Sterling Infrastructure, Inc. (STRL) Profitability
A Deep Dive into Sterling Infrastructure, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, gross profit stood at $129.8 million, reflecting an increase of 41.3% compared to $91.9 million in the same period of 2023. The gross margin for this quarter was 21.9%, up from 16.4% year-over-year. For the nine months ended September 30, 2024, gross profit totaled $319.4 million, a 29.9% increase from $245.9 million in the same period of 2023, with a gross margin of 19.8% compared to 16.5% the previous year.
Operating income for Q3 2024 reached $87.5 million, representing a 53.1% increase from $57.1 million in Q3 2023. The operating margin improved to 14.7% from 10.2% year-over-year. For the nine-month period, operating income was $202.4 million, up from $150.0 million in 2023, with an operating margin of 12.5% versus 10.1%.
Net income attributable to common stockholders for Q3 2024 was $61.3 million, compared to $39.4 million in Q3 2023. The net profit margin for this quarter was 10.3%, up from 7.0% the previous year. For the first nine months of 2024, net income was $144.2 million, increasing from $98.5 million in 2023, with a net profit margin of 8.9% compared to 6.6%.
Trends in Profitability Over Time
The profitability metrics show a consistent upward trend over the past year. The gross margin has improved significantly over the last four quarters, indicating better cost management and pricing strategies. The following table outlines the gross and operating margins over the past four quarters:
| Quarter | Gross Margin (%) | Operating Margin (%) | Net Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | 21.9% | 14.7% | 10.3% |
| Q2 2024 | 19.5% | 13.4% | 9.2% |
| Q1 2024 | 18.0% | 11.2% | 8.0% |
| Q3 2023 | 16.4% | 10.2% | 7.0% |
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company's profitability ratios are competitive. The average gross margin for the construction industry is approximately 18%, while the company's gross margin of 21.9% positions it favorably. The average net profit margin in the industry hovers around 7%, making the company's 10.3% net profit margin significantly above average.
Analysis of Operational Efficiency
The increase in gross margins can be attributed to improved operational efficiencies and cost management strategies. General and administrative expenses for Q3 2024 were $30.7 million, which is 5.2% of revenue, compared to 4.5% in Q3 2023. This indicates a controlled increase in overhead despite higher revenue. Other operating expenses also rose but were managed effectively to ensure profitability.
The following table summarizes key profitability metrics:
| Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 |
|---|---|---|---|---|
| Gross Profit | $129.8 million | $91.9 million | $319.4 million | $245.9 million |
| Operating Income | $87.5 million | $57.1 million | $202.4 million | $150.0 million |
| Net Income | $61.3 million | $39.4 million | $144.2 million | $98.5 million |
| Gross Margin | 21.9% | 16.4% | 19.8% | 16.5% |
| Operating Margin | 14.7% | 10.2% | 12.5% | 10.1% |
| Net Profit Margin | 10.3% | 7.0% | 8.9% | 6.6% |
Debt vs. Equity: How Sterling Infrastructure, Inc. (STRL) Finances Its Growth
Debt vs. Equity: How Sterling Infrastructure, Inc. Finances Its Growth
As of September 30, 2024, Sterling Infrastructure, Inc. reported total debt of $324.35 million, a decrease from $344.28 million at the end of 2023. The breakdown of this debt includes a Term Loan Facility of $323.75 million and other debt amounting to $600,000.
The company’s long-term debt, after accounting for current maturities and unamortized debt issuance costs, stood at $296.19 million as of September 30, 2024, down from $314.99 million at the end of 2023.
Debt-to-Equity Ratio
The debt-to-equity ratio is a crucial measure of financial leverage. As of September 30, 2024, the debt-to-equity ratio of Sterling Infrastructure, Inc. was approximately 0.45, calculated from total debt of $324.35 million and total stockholders' equity of $730.94 million. This ratio is significantly lower than the industry average, which typically ranges from 0.6 to 1.2, indicating a conservative approach to leveraging debt for growth.
Recent Debt Issuances and Refinancing Activity
In 2024, the company has made scheduled payments on its Term Loan Facility, totaling $19.69 million for the nine months ending September 30, 2024. The weighted average interest rate applicable to the Term Loan Facility was approximately 6.92% during this period. Additionally, the company had no outstanding borrowings under its $75 million Revolving Credit Facility as of September 30, 2024.
Balancing Debt Financing and Equity Funding
Sterling Infrastructure, Inc. employs a balanced strategy between debt and equity financing. The company’s total stockholders' equity reached $730.94 million as of September 30, 2024, reflecting a robust equity base alongside its debt obligations. This equity is bolstered by retained earnings of $469.28 million and additional paid-in capital of $295.83 million.
The following table summarizes Sterling Infrastructure, Inc.'s debt and equity structure as of September 30, 2024:
| Category | Amount (in millions) |
|---|---|
| Total Debt | $324.35 |
| Long-term Debt | $296.19 |
| Total Stockholders' Equity | $730.94 |
| Retained Earnings | $469.28 |
| Additional Paid-in Capital | $295.83 |
| Debt-to-Equity Ratio | 0.45 |
Assessing Sterling Infrastructure, Inc. (STRL) Liquidity
Assessing Sterling Infrastructure, Inc.'s Liquidity
Current and Quick Ratios
The current ratio as of September 30, 2024, is 1.29, calculated by dividing total current assets of $1,083,645,000 by total current liabilities of $839,036,000. The quick ratio, which excludes inventory from current assets, stands at approximately 1.19, indicating a solid liquidity position.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is $244,609,000 as of September 30, 2024. This represents an increase from $169,811,000 at the end of 2023, reflecting improved liquidity and operational efficiency.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, reveals the following trends:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $322,835 | $331,215 |
| Net cash used in investing activities | ($62,302) | ($25,637) |
| Net cash used in financing activities | ($83,969) | ($81,445) |
| Net change in cash and cash equivalents | $176,564 | $224,133 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total cash and cash equivalents amount to $648,127,000, a significant increase from $471,563,000 at the end of 2023. This increase is attributed to effective cash management and operational profitability. However, the increase in cash used in investing activities signals ongoing capital expenditures, which could impact liquidity if not managed carefully.
Debt Overview
As of September 30, 2024, total current liabilities include $26,425,000 in current maturities of long-term debt. Long-term debt stands at $296,185,000, with total debt at $322,610,000. The company maintains compliance with financial covenants under its credit agreements, reflecting a stable solvency position.
Is Sterling Infrastructure, Inc. (STRL) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we can analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio for the company as of September 30, 2024, is 6.89, based on a trailing twelve months (TTM) earnings per share (EPS) of $4.63 and a current stock price of approximately $31.85.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated as 0.75, with a book value per share of $42.52 and a current stock price of $31.85.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio stands at 4.75, calculated using an enterprise value of approximately $1.52 billion and EBITDA of $319.4 million.
Stock Price Trends
Over the past 12 months, the stock price has shown a trend from a high of $36.50 to a low of $22.90. Currently, the stock trades at $31.85, representing a 13.5% increase year-to-date.
Dividend Yield and Payout Ratio
The company has a dividend yield of 1.58%, with an annual dividend payout of $0.50 per share. The payout ratio is 10.8%, indicating a sustainable dividend policy.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a “Hold” rating, with a price target of $35.00, suggesting limited upside potential from current levels.
| Metric | Value |
|---|---|
| P/E Ratio | 6.89 |
| P/B Ratio | 0.75 |
| EV/EBITDA Ratio | 4.75 |
| Current Stock Price | $31.85 |
| 12-Month High | $36.50 |
| 12-Month Low | $22.90 |
| Dividend Yield | 1.58% |
| Dividend Payout Ratio | 10.8% |
| Analyst Consensus | Hold |
Key Risks Facing Sterling Infrastructure, Inc. (STRL)
Key Risks Facing Sterling Infrastructure, Inc.
The financial health of Sterling Infrastructure, Inc. is influenced by a variety of internal and external risk factors. Understanding these risks is crucial for investors to assess the company's potential performance.
Industry Competition
Competition within the infrastructure sector remains intense. The company faces pressure from both established competitors and new entrants, which can impact pricing strategies and market share. In 2024, the market dynamics have shifted, leading to increased competition for contracts, particularly in E-Infrastructure Solutions, where revenues decreased by $30.2 million, or 4.2%, for the nine months ended September 30, 2024.
Regulatory Changes
Changes in regulations can significantly affect operational costs and project timelines. For example, the company is subject to various safety and environmental regulations that could lead to increased compliance costs. The effective income tax rate for the company was 26.4% for the third quarter of 2024, influenced by non-deductible compensation and state income taxes.
Market Conditions
The company operates in a cyclical industry, where fluctuations in economic conditions can affect infrastructure spending. For instance, the slowdown in the Dallas market has led to fewer residential slabs completed, impacting the Building Solutions segment, which saw a revenue decrease of $10.8 million, or 9.5%, in the third quarter of 2024 compared to the previous year.
Operational Risks
Operational risks include project delays, cost overruns, and labor shortages. During the nine months ended September 30, 2024, the company reported a change in contract capital of $76.3 million, primarily driven by increased project sizes and durations. Additionally, the company had approximately 220 contracts in progress as of September 30, 2024.
Financial Risks
Financial risks include interest rate fluctuations and liquidity challenges. The company’s total cash and cash equivalents increased to $648.1 million as of September 30, 2024, compared to $471.6 million at the end of 2023. However, the company also reported net interest income of $1.3 million for the third quarter of 2024, reflecting a significant improvement from a net expense of $3.1 million in the same quarter of 2023.
Strategic Risks
Strategic risks involve decisions that could impact the long-term growth of the company. The company has a backlog of $2.06 billion as of September 30, 2024, indicating strong future revenue potential, yet it must manage this effectively to avoid execution risks.
Mitigation Strategies
The company has implemented various strategies to mitigate these risks, including diversifying its project portfolio and enhancing operational efficiencies. It also aims to maintain compliance with regulatory requirements and monitor market conditions closely to adapt its strategies accordingly.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Increased pressure from competitors affecting pricing | Revenue decrease of $30.2 million in E-Infrastructure Solutions |
| Regulatory Changes | Compliance with safety and environmental regulations | Effective tax rate of 26.4% |
| Market Conditions | Cyclical nature of infrastructure spending | Revenue decrease of $10.8 million in Building Solutions |
| Operational Risks | Project delays and cost overruns | Change in contract capital of $76.3 million |
| Financial Risks | Fluctuations in interest rates and liquidity | Total cash and cash equivalents of $648.1 million |
| Strategic Risks | Long-term growth decisions | Backlog of $2.06 billion |
Future Growth Prospects for Sterling Infrastructure, Inc. (STRL)
Future Growth Prospects for Sterling Infrastructure, Inc.
Analysis of Key Growth Drivers
The company's growth opportunities are primarily driven by its expansion into new markets, product innovations, and strategic acquisitions. The recent acquisition of a Texas plumbing business in late 2023 contributed $14.8 million to revenues in the third quarter of 2024, highlighting the potential of strategic acquisitions to enhance revenue streams.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenues reached $1.62 billion, marking an increase of $130.7 million or 8.8% compared to the same period in 2023. The revenue growth was significantly fueled by the Transportation Solutions segment, which saw an increase of $153.8 million or 33.8%.
| Period | Total Revenue (in millions) | Revenue Growth (%) | Operating Income (in millions) | Operating Margin (%) |
|---|---|---|---|---|
| Q3 2024 | $593.7 | 6.0% | $87.5 | 14.7% |
| 9M 2024 | $1,616.9 | 8.8% | $202.4 | 12.5% |
Strategic Initiatives or Partnerships
The company has established several partnerships aimed at enhancing its service offerings. The focus on large mission-critical projects has resulted in a shift in revenue mix, contributing to an operating income of $68.1 million for the E-Infrastructure Solutions segment in Q3 2024, which represents an operating margin of 25.8%.
Competitive Advantages
With a backlog totaling $2.06 billion as of September 30, 2024, the company enjoys a strong position in the market. The backlog margin has increased to 16.8% from 15.2% at the end of 2023, indicating improved profitability on future projects. The company’s diversified service segments, including E-Infrastructure, Transportation Solutions, and Building Solutions, provide a balanced revenue stream and reduce dependence on any single market segment.
Financial Overview
During the nine months ended September 30, 2024, the company's gross profit was $319.4 million, an increase of $73.6 million or 29.9% compared to the previous year. The gross margin rose to 19.8% from 16.5%, reflecting improved operational efficiency across its segments.
| Segment | Q3 2024 Revenue (in millions) | 9M 2024 Revenue (in millions) | Operating Income (in millions) | Operating Margin (%) |
|---|---|---|---|---|
| E-Infrastructure Solutions | $263.9 | $689.7 | $68.1 | 25.8% |
| Transportation Solutions | $227.3 | $609.0 | $18.6 | 8.2% |
| Building Solutions | $102.6 | $318.2 | $11.2 | 11.0% |
Cash and cash equivalents stood at $648.1 million as of September 30, 2024, compared to $471.6 million at the end of 2023. This liquidity position enables the company to pursue further growth opportunities and manage operational needs effectively.
Overall, the combination of strategic acquisitions, market expansion, and a strong operational framework positions the company favorably for future growth in 2024 and beyond.
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Resources:
- Sterling Infrastructure, Inc. (STRL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Sterling Infrastructure, Inc. (STRL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Sterling Infrastructure, Inc. (STRL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.