The medium-size Houston-based road, paving and pipe contractor has turned in a solid performance since debuting as a publicly traded company whose shares are traded on a major exchange earlier this year (ENR 1/3-10 p. 14). Since then, Sterling has posted record revenue and earnings (AMEX: STV). When 2005 is in the books, revenue should stand at $220 million and pretax income should hit $10 million, the company has told investors.
All the while Sterling has stuck to Texas for construction work, including numerous contracts of between $5 million and $10 million. But if the planned stock sale succeeds there will be even more funds available for acquisitions, possibly out of state.
Answering a question from an investor during a Nov. 7 financial conference, Chief Executive Patrick Manning said, "I think the expansion opportunities in Texas are still significant, although I would consider an out-of-state acquisition if the right one came along."
Not many construction contractors have been able to tap into public equity markets in recent years. And as a single-state contracting business, Sterling is even more unusual. So far its management has not drawn up plans for becoming a national firm.
For the first nine months of 2005, Sterling reported net income from operations of $5.5 million, on revenue of $157.8 million, compared to $2.3 million and $95.2 million in the same period last year. The companys third quarter net income, $2.7 million, exceeded all of 2004s net income.
The encouraging performance can be traced to growth in Sterlings municipal and state highway work, incentives for completing some contracts early and lower insurance costs, says Manning.
The company is spending steadily in order to grow, including $2 million for equipment, says Manning. It also is exiting the auto parts business, says Maarten Hemsley, chief financial officer. Auto parts accounted for about 10% of the firms revenue, but the contracting backlog is now $288 million.
Sterlings share offering would be made at the same time the company sells a big block of stock belonging to a longtime director. Sterling would put many more shares belonging to the corporation up for sale. The closing price Nov. 22 was $19.63.terling Construction Co., which completed a complex succession plan involving a merger with a publicly traded company earlier this year, is planning to raise as much as $28.7 million in a sale of its shares. The company would use some of the money for equipment, debt repayment and buying other companies.