D.A. Davidson sees a better setup for shares of Sterling Infrastructure going forward as demand for data centers continues to accelerate. The investment firm upgraded the construction services and infrastructure stock to a buy rating from neutral. Analysts led by Brent Thielman maintained their price target of $185, which implies a roughly 51% upside from the stock’s Wednesday closing price. Shares of Sterling Infrastructure have slumped 34% over the past three months and 23% so far in 2025, according to FactSet data. Thielman said the reset presents a good buying opportunity for investors. STRL 1Y mountain STRL 1Y chart “Considering STRL shares have pulled back significantly this year along with above factors, current levels appear attractive,” the investment bank said. As catalysts, Thielman pointed to a potential resumption in southern homebuilding activity alongside overall strength in Sterling’s e-infrastructure solutions segment, which develops systems for data centers and e-commerce warehouses and distribution centers. E-infrastructure earnings potential and profit margins could rise compared with last year as demand for data centers, industrial facilities and e-commerce accelerates. Thielman also believes that Sterling is ikely to engage in mergers and acqusitions, given the company’s “meaningful liquidity” and “very effective record of accretive transactions.” He added that strength in the company’s e-infrastructure segment could push margins and earnings potential even higher going forward than previously estimated. Davidson downgraded its Sterling investment recommendation a year ago, but now says its revised 2025 earnings per share and free cash flow estimates are 30% and 38% higher, respectively, than they were at the time. “E-Infrastructure growth is expected to be > 10% with EBIT growth of > 25% — it appears STRL largely has what it needs to achieve this target,” Thielman wrote. “Overall our estimates increase for 2025 and 2026 EPS/ EBITDA. We expect strong cash flow albeit we are approaching conversion assumptions below recent years — we still think we could see FCF/sh of ~$12/share-$13/share in each of the next couple of years (2024 was ~$13/share).”
