Sterling Construction: Banking on a builder

America is crumbling, and we’re not talking the economy here.

The U.S. infrastructure needs upgrading worse than that old computer running Windows 98. Just a few of the problems faced by state and municipal governments are packed roads that can’t handle 21st-century traffic, century-old water and sewer lines continually springing leaks, and airports lacking the long runways needed to handle the biggest jets leaping to the skies.

Even with budget shortfalls knocking on the doors of government at all levels, elected officials know they must keep the customer satisfied by paving the potholes and keeping the water and sewage flowing for consumers and businesses. Sterling Construction Company, Inc. (Nasdaq: STRL) has been lending its expertise to all sorts of public projects in the building and rebuilding of Texas and the Southwest.

Mom and Pop might suck it up and put off some of those big home improvements during the current economic downturn, but they’re going to give government officials an earful if they’re repeatedly sitting in traffic jams or finding a sewage backup in their basement.

That’s where Sterling Construction comes in. Primarily operating through its Texas Sterling Construction business, which traces its lineage back more than half a century, Sterling has been winning a healthy stream of contracts from state and municipal government for transportation and water infrastructure projects in the Longhorn state.

Last month, the company announced its latest deals: it was the low bidder on a $26 million road project in Collin County, Texas, north of Dallas, with completion expected in the fall of 2010, and it was the apparent low bidder on a $55 million rebuilding project for the North Texas Toll Road Authority that will continue into the summer of 2010.

Three analysts surveyed by Thomson Financial have a favorable view of Sterling Construction with either a “strong buy” or “buy” rating on the stock. The recent median 12-month price target from Thomson is $26.50. On Thursday, Sterling closed at $18.40.


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