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Q3 Rundown: Sterling (NASDAQ:STRL) Vs Other Engineering and Design Services Stocks

By: StockStory

November 26, 2024 at 04:27 AM EST

STRL Cover Image

Earnings results often indicate what direction a company will take in the months ahead. With Q3 behind us, let’s have a look at Sterling (NASDAQ: STRL) and its peers.

Companies providing engineering and design services boast ever-evolving technical expertise. Compared to their counterparts who manufacture and sell physical products, these companies can also pivot faster to more trending areas due to their smaller physical asset bases. Green energy and water conservation, for example, are current themes driving incremental demand in this space. On the other hand, those providing engineering and design services are at the whim of construction and infrastructure project volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates.

The 5 engineering and design services stocks we track reported a strong Q3. As a group, revenues missed analysts’ consensus estimates by 1.2% while next quarter’s revenue guidance was 1.9% below.

Thankfully, share prices of the companies have been resilient as they are up 8.8% on average since the latest earnings results.

Sterling (NASDAQ: STRL)

Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ: STRL) provides civil infrastructure construction.

Sterling reported revenues of $593.7 million, up 6% year on year. This print fell short of analysts’ expectations by 2.3%, but it was still a strong quarter for the company with a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ EPS estimates.

"In the third quarter we delivered 6% revenue growth and a remarkable 56% increase in diluted EPS. Our focus on margin expansion continues to drive profitability growth well in excess of revenue growth. Gross profit margins of 21.9% marked a new record, and we continue to look for opportunities to drive further expansion," stated Joe Cutillo, Sterling's Chief Executive Officer.

Sterling achieved the highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 12.8% since reporting and currently trades at $197.99.

Read why we think that Sterling is one of the best engineering and design services stocks, our full report is free.

Best Q3: Dycom (NYSE: DY)

Working alongside some of the most popular mobile carriers in the world, Dycom (NYSE: DY) builds and maintains telecommunications infrastructure.

Dycom reported revenues of $1.27 billion, up 12% year on year, outperforming analysts’ expectations by 4.3%. The business had a very strong quarter with an impressive beat of analysts’ adjusted operating income estimates.

Dycom delivered the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 11.2% since reporting. It currently trades at $179.95.

Is now the time to buy Dycom? Access our full analysis of the earnings results here, it’s free.

Weakest Q3: AECOM (NYSE: ACM)

Founded in 1990 when a group of engineers from five companies decided to merge, AECOM (NYSE: ACM) provides various infrastructure consulting services.

AECOM reported revenues of $4.11 billion, up 7% year on year, in line with analysts’ expectations. It was a mixed quarter as it posted full-year EPS guidance slightly topping analysts’ expectations but a miss of analysts’ adjusted operating income estimates.

Interestingly, the stock is up 8% since the results and currently trades at $117.95.

Read our full analysis of AECOM’s results here.

EMCOR (NYSE: EME)

Through its network of over 70 subsidiaries, EMCOR (NYSE: EME) provides electrical, mechanical, and building construction and services

EMCOR reported revenues of $3.70 billion, up 15.3% year on year. This print came in 2.5% below analysts' expectations. More broadly, it was actually a strong quarter as it recorded an impressive beat of analysts’ EBITDA estimates.

EMCOR achieved the fastest revenue growth but had the weakest full-year guidance update among its peers. The stock is up 18.8% since reporting and currently trades at $512.48.

Read our full, actionable report on EMCOR here, it’s free.

MasTec (NYSE: MTZ)

Involved in the 1996 Olympic Games MasTec (NYSE: MTZ) is an infrastructure construction company that specializes in the telecommunications, energy, and utility industries.

MasTec reported revenues of $3.25 billion, flat year on year. This result came in 5.4% below analysts' expectations. In spite of that, it was a strong quarter as it produced an impressive beat of analysts’ EPS and adjusted operating income estimates.

MasTec had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is up 15.5% since reporting and currently trades at $142.07.

Read our full, actionable report on MasTec here, it’s free.

Market Update

As a result of the Fed's rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed's 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump's victory in the US Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain. Said differently, there's still much uncertainty around 2025.

Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Growth Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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