Willdan Group and Sterling Infrastructure Post Strong Q2 Results
Last week, Willdan Group (WLDN) and Sterling Infrastructure (STRL) exceeded their expectations for the second quarter, achieving record revenue and net income. This success can be attributed to their strong performance in growing infrastructure sectors.
Analyzing Willdan and Sterling’s Projected Growth
Both companies recently upgraded their full-year guidance following impressive Q2 performance, largely supported by steady revenue from state and municipal contracts. Willdan has raised its net revenue forecast to between $340 million and $350 million, while also adjusting its expected earnings per share (EPS) to a range of $3.50 to $3.65 and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to between $70 million and $73 million. This uptick follows the securing of a significant $30 million contract with the City of Fairfield in California, a $20 million agreement with National Grid (NGG), and a long-term deal with the Los Angeles Department of Water and Power.
On the other hand, Sterling Infrastructure has revised its revenue outlook to between $2.10 billion and $2.15 billion. Similarly, its net income and adjusted EPS forecasts now range from $243 million to $252 million and $9.21 to $9.47, respectively. A notable aspect of Sterling’s achievements is its backlog, which exceeds $2 billion and is focused predominantly on high-margin initiatives, including roadway projects in states like Utah, Colorado, and Texas.
Strategic Growth: Acquisitions in AI and EV Infrastructure
In addition to consistently surpassing earnings expectations and enhancing their financial forecasts, both Willdan and Sterling have positively influenced investor sentiment through strategic acquisitions. Their expansions into data center infrastructure are particularly noteworthy, responding to the growth of artificial intelligence technology.
In March, Willdan acquired Alternative Power Generation (APG), significantly bolstering its capacity to handle the complex demands of commercial electric loads and grid interconnections, particularly for AI data centers and electric vehicle (EV) charging stations.
Similarly, Sterling plans to acquire CEC Facilities Group later this year, which specializes in electrical and mechanical services. This acquisition will expand Sterling’s capabilities in mission-critical electrical contracting for semiconductor and data center operations. Sterling has already demonstrated its proficiency in developing EV infrastructure, working on projects for major manufacturers like Hyundai (HYMLF) and Rivian (RIVN), particularly in Georgia.
Stock Performance of Willdan and Sterling
Both companies have emerged as strong performers in the market this year. Willdan’s stock has surged nearly 200%, currently hovering around $112 per share, while Sterling’s shares have risen by over 70%, reaching just under $300. Over the past three years, Willdan and Sterling have seen their stocks increase by more than 380% and 260%, respectively.
Valuation Comparison: WLDN and STRL
Both companies are now forecasting high double-digit EPS growth for this year, with Sterling boasting a slight edge in price-to-earnings (P/E) ratio at 34 times its forward earnings, compared to Willdan’s P/E ratio of 40.3. Despite raising its fiscal revenue guidance, Willdan’s top line is anticipated to decline by at least 38% following a record year in which it achieved $566 million in sales, while Sterling looks set to match or surpass its previous annual sales peak.
Overall, Willdan Group and Sterling Infrastructure have established themselves as leading engineering firms worthy of investment consideration. Presently, Sterling’s robust revenue and net income figures may provide a more attractive option for investors, particularly given its successful expansion beyond traditional infrastructure projects into EV manufacturing facilities.
Both companies’ commitment to expanding into data center infrastructure suggests they are likely to remain viable investments for the long term.
