Sterling (STRL) Acquires Kimes, Expands Presence & Offerings
Sterling Construction Company's (STRL) specialty infrastructure business is set to benefit from the recent buyout.
In a bid to vertically integrate specialty infrastructure services in the Southeast region, Sterling Construction Company, Inc. STRL has acquired Kimes & Stone for $7.6-million cash.
Kimes is a diversified services provider. Its work includes soil stabilization for site development on e-commerce projects such as large fulfillment and distribution centers and data centers as well as soil stabilization for roadways and manufacturing plant construction. Sterling’s site development business has been its major customer over the past several years.
The recent buyout includes a fleet of soil stabilization equipment, working capital, and an experienced and highly effective management team and workforce. The acquisition will enhance capacity, assets, and people; broaden the range of high-quality private and public customers in the rapidly growing end markets; and advance e-infrastructure service offering to key blue-chip customers in the region.
Sterling’s chief executive officer, Joe Cutillo, said, "Since our purchase of Plateau a little more than two years ago, we have seen a significant increase in demand for the superior performance of soil cement stabilization as opposed to the stone stabilization method. Kimes’ strong culture, equipment fleet, and solid competencies in soil cement stabilization will allow us to rapidly expand these capabilities into our existing and future geographic footprint."
Acquisition Strategy Bodes Well
In 2016, Sterling implemented a growth and expansion strategy through buyouts. The buyouts help the company to broaden the types of projects it executes and enhance market reach. Sterling primarily targets those companies for acquisition that have gross margins of 15% or more. Earlier, it completed Tealstone and Plateau acquisitions in 2017 and 2019, respectively.
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On Oct 2, 2019, Sterling acquired all issued and outstanding shares of LK Gregory Construction, Inc. and Plateau Excavation, Inc. as well as all issued and outstanding equity interests in DeWitt Excavation, LLC (collectively Plateau). Plateau provides engineering and executing site development services to general contractors and developers engaged in construction and engineering services relating thereto.
On Apr 3, 2017, it completed the buyout of all issued and outstanding shares of Tealstone Commercial, Inc., and Tealstone Residential Concrete, Inc. (collectively Tealstone). Tealstone mainly focuses on concrete construction of residential foundations, parking structures, elevated slabs, and other concrete work for leading home builders, multi-family developers, and general contractors in both residential and commercial markets.
Sterling’s shares have gained 43.3% so far this year compared with the Zacks Building Products - Heavy Construction industry’s 27.8% rally. Also, earnings estimates for 2021 and 2022 have moved up 7.5% and 7.8% over the past 60 days, indicating 41.5% and 9.5% year-over-year growth, respectively. The company is benefiting from a solid acquisition strategy and strong project execution.
UFP Industries currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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