Sterling (STRL): Record Quarter, Guidance Raised — And 78% Of Revenue Is Now One Bet. Q2 2026

Sterling Infrastructure, Inc. (STRL) Q2 2026 — Reported after the close on August 3 (the three months ended June 30, 2026). Revenue $1,168.2M, up 90.1% from $614.5M with roughly 50 points organic. GAAP diluted EPS $5.00 vs $2.31, +116%. Adjusted diluted EPS $5.80 vs $2.69. Adjusted EBITDA $256.7M at a record 22.0% margin. Signed backlog $4.33B, +116% and +50% organic. Full-year guidance raised for the second time this year, to $4.00-4.15B of revenue and $19.70-20.30 of adjusted EPS. The stock closed at $611.47 and traded down to about $583 after hours, near -4.7% — and it went into the print 38% below its June 4 high of $993.74. The number nobody read: a year ago E-Infrastructure Solutions was 51% of Sterling's revenue. This quarter it was 78%. Transportation fell from 32% to 13%, on purpose. And 92% of E-Infrastructure's backlog is mission-critical work — data centers, semiconductor fabs, manufacturing. In four quarters Sterling converted itself from a diversified infrastructure contractor into a single-end-market company levered to one capital-expenditure cycle, while deliberately running down the state-funded highway business that used to be its shock absorber. THE CALL: AVOID (3/5, EXCEPTIONAL OPERATOR. WRONG PRICE.) — base-case value ~$400.0 vs ~$583.0 today. KEY METRICS: - THE CALL: AVOID 3/5 - fair value ~$400 vs the $611.47 close (-35%) and ~$583 after hours (-31%); Street average $717 (7 buy / 2 hold / 0 sell, 9 analysts), so we DIFFER on both the rating and the number. OWNER EARNINGS ~$600M: guided FY26 GAAP net income $536-555M plus half of intangible amortization after tax, uplifted for the beat we expect, cross-checked against 1H free cash flow of $258M ($328.0M operating cash flow less $69.6M capex). DCF GRID (bear/base/bull x 10/11/12%): $237-211-190, $416-366-326, $638-555-490 - only ONE of nine cells clears $611. REVERSE DCF: $19.0B of market value on ~$600M of owner earnings is 31.7x, needing 15.9% compounding every year for a decade at an 11% discount rate. - THE UNDER-COVERED ANGLE - 78% OF REVENUE IS NOW ONE SEGMENT. E-Infrastructure did $905.0M, up 191.6% from $310.4M, going from 51% of revenue to 78% in four quarters. Transportation fell 20.4% to $156.7M (32% of revenue to 13%) - deliberately, as management reallocates crews to data-center work at an accelerated pace. Building Solutions was flat at $106.5M. With 92% of E-Infra backlog mission-critical, roughly seven-tenths of Sterling now rides on one capex cycle, while the countercyclical state-DOT segment that carried it through 2020 and 2022 is run down on purpose. - ALSO: THE RECORD WAS BOUGHT AT A LOWER MARGIN, AND THE SCARY GUIDE IS A PROVEN SANDBAG. E-Infra revenue grew 192% but adjusted operating income only 148% - segment margin FELL 28.3% to 24.1% (-420bps) as CEC and Stone Ridge diluted the mix. The FY guide leaves $2.081B for 2H vs $1.994B banked, an implied $1.04B quarter, 11% BELOW Q2 - but the identical math in Aug 2025 implied $1.080B and actual was $1.445B, +33.8%. Net cash $180.6M; tangible book equity only ~$81M vs $1.28B of goodwill and intangibles. What to watch: Bullish: E-Infra adjusted operating margin back above 27% (it fell to 24.1%) with organic backlog still compounding; a Q3 that beats the implied 2H guide like last year. Then we move toward $500. Bearish: book-to-burn under 1.0x, E-Infra margin under 22%, or combined backlog falling sequentially. Any two and we are nearer $260. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.