Sterling Infrastructure: Great Business, Less Attractive Stock Today (Rating Downgrade)

Sterling Infrastructure remains fundamentally strong, driven by AI data center build-outs and robust backlog growth, but valuation is now stretched. STRL delivered record Q1 revenue of $825.7M (+92% YoY), with adjusted EPS up 120% YoY, prompting a 50%+ post-earnings rally. FY2026 guidance was raised to $3.70–3.80B in sales and $18.40–19.05 adjusted EPS, with backlog visibility supporting continued growth. I downgrade to 'Hold' as STRL trades at a forward P/E of ~37x; a 15–20% price correction or further earnings revisions would restore margin of safety.