Key Takeaways:
Sterling Infrastructure shares trade at 31.8 times forward earnings after a 216% rally, supported by record backlog and surging AI infrastructure demand.
All nine analysts covering Sterling rate the stock a Strong Buy, with an average price target of $945.71 implying 32% upside from current levels, according to Zacks Investment Research.
First-quarter revenue surged 92% year over year while adjusted earnings per share jumped 120%. Management raised full-year guidance to revenue between $3.7 billion and $3.8 billion and adjusted EPS of $18.40 to $19.05. The Zacks Consensus Estimate for 2026 earnings has risen to $19.12 per share from $13.65 over the past 60 days.
The premium valuation leaves less room for error, but Sterling's growing exposure to AI-driven data centers and semiconductor construction provides a long-term demand tailwind. The company's E-Infrastructure segment, which posted 174% revenue growth in the first quarter, now accounts for more than 90% of total backlog.
Sterling's signed backlog reached $3.8 billion at the end of the first quarter, up 78% year over year, while combined backlog climbed 131% to $5.15 billion. Including unsigned awards and future project phases, the company has visibility into nearly $6.5 billion of future work. Management said increasing project size, complexity and duration continues to strengthen long-term earnings visibility.
The company's E-Infrastructure business, which includes data centers, advanced manufacturing and semiconductor facilities, drove first-quarter adjusted operating income up 177%. Sterling also secured the initial phase of a large semiconductor fabrication campus during the quarter, which management described as the beginning of a much larger opportunity expected to accelerate later this decade.
Sterling trades above the industry average forward P/E of 29.8 times but below MasTec Inc.'s 36.2 times. EMCOR Group Inc. trades at 25.3 times, while Granite Construction Inc. trades at a lower multiple. Sterling has outperformed all three competitors over the past year, with its 216% gain exceeding MasTec's 126% rise, Granite Construction's 60% gain and EMCOR's 46% advance.
The company recently acquired Stone Ridge Contracting, expected to generate $180 million to $200 million in revenue during 2026, strengthening its site development operations across the Pacific Northwest and Texas. Strong cash generation and a healthy balance sheet provide flexibility for further acquisitions while continuing share repurchases.
The Building Solutions segment remains under pressure, with management expecting residential construction markets to stay challenging through 2026 because of affordability pressures. Any slowdown in AI infrastructure capital spending, project delays or weaker customer investment could reduce future growth expectations.
The guidance raise signals management expects AI demand to accelerate. Investors will watch upcoming quarterly results for continued margin expansion and further data center contract wins.
This article is for informational purposes only and does not constitute investment advice.
