Why Sterling Infrastructure (STRL) Is a High-Conviction Buy in a Volatile Market

In a market marked by macroeconomic uncertainty and sector-specific volatility, investors are increasingly seeking companies with resilient business models and clear growth trajectories. Sterling Infrastructure (STRL) stands out as a compelling candidate, driven by robust earnings momentum, a favorable industry positioning in mission-critical infrastructure, and a valuation that appears to align with its long-term potential. With a Zacks Rank of #1 (Strong Buy), upward revisions to earnings estimates, and expanding margins, STRL offers a rare combination of near-term execution and structural growth.

Earnings Momentum and Analyst Optimism

Sterling Infrastructure's third-quarter 2025 results underscore its ability to consistently outperform expectations. The company delivered a 24.73% earnings surprise and a 12.51% revenue surprise, driven by strong demand in its E-Infrastructure Solutions segment. This segment, focused on data center development and mission-critical projects, saw a 125% year-over-year revenue increase in Q3 2025. Analysts have taken notice: earnings estimates for the company have risen by 9.2% over the past three months, reflecting confidence in its operational execution and guidance.

The company's full-year 2025 guidance has been raised, with management projecting $10.350–$10.520 in EPS, well above the consensus estimate of $9.250. This upward revision is a testament to Sterling's disciplined project selection and cost controls, which have enabled margin expansion amid rapid growth. The Zacks Rank #1 designation further validates this optimism, as the company's earnings trajectory continues to attract institutional attention.

Structural Strength in Mission-Critical Infrastructure

Sterling's strategic focus on high-margin, mission-critical infrastructure has positioned it to capitalize on secular trends. The E-Infrastructure Solutions segment, which accounts for a significant portion of the company's backlog, now holds a $2.58 billion signed backlog as of September 30, 2025 according to company reports. This includes $475.3 million in backlog from the CEC Facilities Group acquisition, which has enhanced the company's electrical capabilities and cross-selling opportunities.

Margin expansion has been a key driver of profitability. In Q3 2025, the E-Infrastructure segment achieved an adjusted operating margin of 28.4%, up from 23.7% in 2024. Management expects full-year 2025 gross margins to reach 23%, supported by its focus on complex, premium-priced projects. The CEC acquisition is projected to further strengthen margins in 2026, with adjusted operating margins for the E-Infrastructure segment anticipated to climb to 25%.

Valuation and Growth Alignment

Despite its strong performance, Sterling Infrastructure remains attractively valued relative to its growth prospects. The company's PEG ratio of 0.82 (as of January 5, 2026) suggests it is undervalued compared to its 5-year EBITDA growth rate of 43.20%. This metric outperforms 68.94% of its peers in the Construction industry according to industry analysis. Additionally, a discounted cash flow (DCF) model estimates an intrinsic value of $315.15 per share, aligning closely with its current price.

While the forward P/E ratio of 27.1 is elevated, it is justified by the company's projected EPS growth. Analysts forecast 71% year-over-year EPS growth in 2025 and 14.6% in 2026, reflecting a compound annual growth rate of 20.11% over the next three years. These figures highlight Sterling's ability to scale profitably, even in a challenging macroeconomic environment.

Strategic Entry Point in a High-Growth Sector

Sterling Infrastructure's outperformance-a 90.3% year-to-date stock price surge-reflects its unique positioning in the e-infrastructure and data center markets. As digital transformation accelerates, demand for mission-critical infrastructure will remain robust, providing STRL with a durable growth tailwind. The company's low debt-to-equity ratio of 0.39 and a positive net cash position of $12 million further enhance its financial flexibility.

Conclusion

Sterling Infrastructure's combination of earnings momentum, margin expansion, and favorable valuation metrics makes it a high-conviction buy in a volatile market. With a Zacks Rank of #1, a strong backlog, and a PEG ratio that suggests undervaluation, STRL is well-positioned to deliver outsized returns for investors seeking exposure to the infrastructure boom. As the company continues to execute on its strategic priorities, it offers a rare blend of near-term visibility and long-term growth potential.