Sterling vs Quanta: Which Infrastructure Stock is the Better Buy?

An analysis comparing Sterling Infrastructure (STRL) and Quanta Services (PWR) favors Sterling due to its compelling growth in high-margin e-infrastructure, particularly data centers driven by AI demand, and a more favorable valuation with a P/E ratio of 20.65X compared to Quanta's 30.49X. Sterling's Q1 2025 results showed a 29% increase in adjusted EPS to $1.63 and a 61% surge in operating income within its E-Infrastructure Solutions segment, fueled by a 60% year-over-year increase in data center demand, while Quanta, despite its larger scale and diversified energy infrastructure portfolio, faces valuation concerns.

Analysis

Both Sterling Infrastructure (STRL) and Quanta Services (PWR) are capitalizing on strong secular tailwinds from increased infrastructure spending, including the Infrastructure Investment and Jobs Act (IIJA), and escalating demand in e-infrastructure and energy transition. Sterling (STRL) reported a robust start to 2025, with Q1 adjusted EPS of $1.63 (up 29% YoY) and a 31% rise in adjusted EBITDA to $80 million, largely propelled by its E-Infrastructure Solutions segment, which saw revenues climb 18% and operating income jump 61%. This segment's growth is significantly fueled by a 60% YoY surge in data center demand, now comprising over 65% of its backlog and contributing to a record total company backlog of $2.13 billion and a Q1 gross margin improvement of 450 basis points to 22%. For full-year 2025, STRL projects revenues between $2.05-$2.15 billion (flat YoY at midpoint), but anticipates adjusted EPS growth of 1.6%-7.6% and adjusted EBITDA growth of 10.8%-16.8%, while Zacks Consensus Estimates for its 2025 EPS indicate 38.5% growth. Quanta Services (PWR), a significantly larger entity with over $20 billion in annual revenues, also demonstrated strength in Q1 2025, particularly in its Electric Infrastructure Solutions segment, where revenue grew 26.4% YoY to $4.94 billion and operating margins expanded 60 bps. PWR projects stronger overall 2025 revenue growth of 13.8% (midpoint) to $26.7-$27.2 billion and adjusted EPS growth of 12-18.7%, supported by a total backlog of $35.25 billion. However, PWR faces a potential headwind from new tariff regimes from late 2026 and trades at a higher forward P/E of 30.49X compared to STRL's 20.65X, while both exceed the industry P/E of 18.99X. STRL has also exhibited superior recent stock performance, growing 24.9% in the past month versus PWR's 17.3%.

Key Decisions for Investors

• Consider initiating or increasing positions in Sterling Infrastructure (STRL) for alpha generation, given its strong momentum in the high-margin data center segment and more favorable valuation relative to Quanta Services.
• Closely track STRL's quarterly execution on its E-Infrastructure backlog and gross margin sustainability, as these are key catalysts for potential outperformance.
• Maintain exposure to Quanta Services (PWR) for its stable, large-scale infrastructure play and role in the energy transition, but be prepared to adjust allocation based on valuation re-rating or crystallization of tariff risks anticipated from late 2026.
• Re-evaluate relative weightings between STRL and PWR based on individual fund mandates, recognizing STRL's higher growth potential against PWR's established, diversified market leadership within the buoyant infrastructure sector.