You might hear “infrastructure” and think traffic cones, potholes, and ribbon-cuttings with mayors in hard hats. Not this time.
After a 170% surge in the past year, it’s worth asking: is this just hype, or is there still juice left in the tank?
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Sterling Infrastructure [STRL] is not your average road-paving contractor.
It has three core businesses: E-Infrastructure (data centers, warehouses, power sites), Transportation (roads, bridges, airports), and Building Solutions (residential and commercial foundations).
The key driver now is E-Infrastructure.
Demand for data centers tied to AI and cloud workloads has gone vertical, and Sterling has positioned itself as the behind-the-scenes builder for blue-chip clients.
That means it gets paid before the servers are even plugged in.
And unlike low-margin highway projects where every bid is a race to the bottom, these jobs carry fat margins.
Action: Investors who want exposure to AI without paying nosebleed multiples for Nvidia or Super Micro could consider Sterling as a “picks and shovels” play. |
Recent Momentum
Q2 2025 was a mic-drop quarter. EPS came in at $2.69, crushing expectations by almost 20%, while revenue jumped 21% year over year.
Margins expanded by 400 basis points to 23%, showing the shift toward higher-value work is paying off. Free cash flow? Up. Backlog? At $2 billion, and growing.
The market noticed. Shares are up nearly 80% year to date and have tripled in the past 18 months.
While that might sound frothy, the rally is grounded in earnings power, not just vibes.
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The AI Angle
If you’re wondering why a construction company suddenly looks like a tech darling, here’s the punchline: Sterling just secured a $100 million contract for a massive Southeastern data center build, part of the AI wave.
And with its pending $505 million acquisition of CEC Facilities Group, Sterling is adding mission-critical electrical contracting to its toolkit.
The company is not just pouring concrete, but wiring up the digital infrastructure that keeps AI running.
E-Infrastructure revenue grew 29% last quarter, operating income surged 57%, and data centers now make up 62% of the backlog.
In other words, Sterling is riding one of the biggest secular growth trends of the decade while still looking like a construction stock on paper.
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Growth Outlook
Sterling expects EPS growth of 41% this year, taking earnings to $8.61 per share. Analysts see another 10% growth next year.
That’s on top of a revenue base approaching $2.1 billion.
The backlog is spread across transportation projects in Colorado, Utah, and Houston, as well as e-commerce distribution centers that tie directly to America’s consumption habits.
This blend gives Sterling visibility into cash flows for multiple years while keeping it tethered to both public and private spending cycles.
UBS, DA Davidson, and other analysts have all raised their price targets post-earnings, with consensus near $265 and upside cases above $300.
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Action Plan: How to Play It
Here’s a simple roadmap for retail investors sizing up STRL:
Entry Zone: Look for dips toward $285–$295 as potential buy points.
Upside Target: Near-term potential to $325 if backlog growth continues and CEC integration delivers.
Longer-Term View: If AI data center demand holds, EPS could top $10 by 2027, supporting a stock price north of $350.
Stop-Loss Zone: Use $265 as a floor to manage downside.
Think of it like ordering at Chili’s (not Sterling’s client, but stick with me): the stock isn’t on the value menu anymore, but the portion size keeps growing.
Risks
Every rally comes with potholes. Here are the key watchpoints for STRL:
Valuation Premium: STRL trades at 28–32x forward earnings, above peers like AECOM (21x) and Fluor (19x). If growth slows, that premium could vanish fast.
Integration Risk: The CEC acquisition looks smart, but large deals can backfire if synergies don’t materialize. Watch Q4 commentary closely.
Customer Concentration: Heavy reliance on big tech data center clients means one delayed project could dent results.
Cyclicality: Infrastructure spending is tied to government budgets and capital cycles. A slowdown in federal funding or private AI buildouts would sting.
Debt Load: Taking on CEC adds leverage. Not dangerous now, but worth monitoring if rates stay high.
Action Recap
✅ Buy dips near $285–$295 for exposure to AI-driven infrastructure
✅ Add if CEC acquisition closes smoothly and EPS momentum holds
✅ Target $325 near-term and $350+ longer-term with data center backlog growth
✅ Use $265 as a stop-loss to limit risk
✅ Keep an eye on customer concentration and integration progress as leading signals
Final Take
Sterling Infrastructure isn’t just laying concrete. It’s laying the foundation for the AI economy.
With a $2 billion backlog, margin expansion, and a high-profile acquisition set to close, the growth story is hard to ignore.
Yes, the valuation is stretched compared to old-school construction names. But this isn’t an old-school construction name anymore.
It’s a hybrid. Part builder, part tech enabler, and all in on high-margin projects.
If you’re looking for a less obvious way to play AI without paying Nvidia prices, STRL deserves a serious look.
Just don’t be surprised if this “boring” infrastructure stock keeps outperforming the flashy tech crowd.
That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.
Best Regards,
— Adam Garcia
Elite Trade Club
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