UPDATE 2-Sterling Construction Q2 misses, sees weak 2010

Mon Aug 9, 2010 8:18am EDT

* Q2 EPS $0.28 vs est $0.29

* Q2 revenue drops 3 pct

* Still sees 2010 profit "substantially below" 2009 (Adds details)

Aug 9 (Reuters) - Sterling Construction Co Inc (STRL.O), a specialist in building and repairing transport and water infrastructure in Texas, Utah and Nevada, lagged quarterly earnings estimates, squeezed by rising costs, and again warned full-year profit would be "substantially below" last year.

"Business conditions in the heavy civil construction industry remain very challenging," COO Joseph Harper said, adding "there is still a lack of visibility with respect to Federal and state funding for highways and bridges".

The highway bill authorizes long-term federal funding for state highway projects. The law expired last September, but U.S. Congress has kept up the flow of money through short-term extensions. [ID:nSGE6490N4]

With plans on hold to overhaul the bill -- one of the richest and most popular legislative undertakings for states -- fewer states are putting out project tenders, triggering intense competition and margin pressure.

As a result, the company said it idled some of its equipment fleet. Since June 2009, Sterling has been trimming its workforce and idling equipment in Texas and Nevada in response to lower backlog levels.

The company added that residential and commercial construction development contractors have also entered its smaller public sector transport and water infrastructure markets, adding to the competitive pressures.

Sterling said it added $58 million in new contract awards in April-June, bringing new awards for the first half to $112 million, and giving the company an end-June backlog of $557 million.

Q2 MISSES STREET

April-June net income dropped to $4.7 million, or 28 cents a share, from $9.3 million, or 68 cents a share, a year ago.

Revenue slipped 3 percent to $116.9 million.

Analysts on average had expected earnings of 29 cents a share, before special items, on revenue of $118.4 million, according to Thomson Reuters I/B/E/S.

Expenses for the quarter were up 38 percent to $5.2 million.

Shares of the $197 million company closed at $12.25 on Friday on Nasdaq, and have dropped 42 percent since their 2010 high in mid-March. (Reporting by Fareha Khan in Bangalore; Editing by Gopakumar Warrier and Ian Geoghegan)

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