MYRG Q2 Deep Dive: Outperformance Overshadowed by Declining Backlog and Mixed Industry Signals

Electrical construction and infrastructure services provider MYR Group (NASDAQ:MYRG) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 8.6% year on year to $900.3 million. Its non-GAAP profit of $1.70 per share was 12.1% above analysts’ consensus estimates.

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StockStory’s Take

MYR Group’s second quarter results surpassed Wall Street’s expectations for both revenue and adjusted earnings per share, yet the market reacted negatively. Management attributed quarterly growth primarily to strong execution across both the Transmission and Distribution (T&D) and Commercial and Industrial (C&I) segments, supported by new master service agreements and robust demand for electrical infrastructure. CEO Richard Swartz highlighted that better-than-anticipated productivity and favorable project closeouts drove improved margins, though some project inefficiencies and higher labor costs remained headwinds. The company also noted the positive impact of expanding customer relationships and healthy bidding activity.

Looking forward, management expects industry demand for grid modernization and electrification to sustain growth opportunities, particularly as large-scale investments in U.S. power infrastructure continue. CFO Kelly Huntington stated that high single-digit growth is anticipated for both core segments, excluding solar, but acknowledged that quarterly results could be uneven due to the timing of project awards and execution. The company’s approach remains selective, especially in renewable energy, with Swartz emphasizing patience and focus on long-term contractual opportunities. Management is also monitoring capital allocation between acquisitions, organic growth, and share repurchases as market conditions evolve.

Key Insights from Management’s Remarks

Management credited margin expansion to improved project execution and a more favorable mix, while also flagging persistent labor and project inefficiency challenges. Recent contract wins and sector trends were highlighted as catalysts for ongoing growth.

• Project execution boosted margins: MYR Group’s improved gross and operating margins stemmed from better-than-expected productivity and the successful closeout of key projects, particularly in the T&D segment. Management cited the absence of last year’s problem projects and more favorable contract mix as additional contributors.
• New master service agreements: The company secured several new long-term master service agreements, including a five-year distribution contract with Xcel Energy, expanding its recurring revenue base and reinforcing its presence with major utilities. These contracts are expected to provide revenue visibility through 2029, with construction projects for the Xcel Energy agreement estimated to begin in the first part of 2026.
• Healthy bidding and pipeline activity: Both T&D and C&I segments benefited from active bidding environments, with management reporting a “healthy mix” of project sizes and an increase in awards throughout core markets such as data centers, aerospace, transportation, healthcare, and higher education.
• Labor and project inefficiencies: Despite operational improvements, management acknowledged ongoing cost pressures, especially related to labor availability and project inefficiencies. These were partly offset by investments in employee training and recruitment.
• Selective approach to renewables: In the T&D segment, solar project activity continued to decline as the company took a more selective stance. However, on the C&I side, solar remains a core market with steady momentum, and the company continues to participate where contractual terms are favorable.

Drivers of Future Performance

MYR Group’s outlook is shaped by persistent electrification trends, grid modernization efforts, and careful capital allocation amid labor and project timing uncertainties.

• Grid modernization and electrification: Management expects increasing demand for electricity and resilient infrastructure to drive project opportunities in both core segments. Industry forecasts for multi-decade investments in U.S. power infrastructure underpin the company’s medium-term optimism.
• Capital deployment and acquisitions: With a strong balance sheet and a new share repurchase program, MYR Group is weighing opportunities for organic growth, selective acquisitions, and capital returns. Swartz indicated the company will remain disciplined in M&A, prioritizing additive deals at reasonable valuations, and is willing to pay a fair multiple for the right company, especially as C&I sector multiples have risen.
• Timing and cost pressures: Management cautioned that quarterly results may fluctuate due to project timing and the unpredictability of materials and labor costs. The company continues to invest in equipment and talent, balancing spending and making the right calls as market needs dictate, but not making drastic increases in spending.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) the pace and profitability of new project awards, especially master service agreements and large C&I contracts, (2) the evolution of backlog trends as a sign of future revenue visibility and project pipeline health, and (3) management’s capital allocation decisions between acquisitions, organic investment, and share repurchases. Continued progress in renewables and data center markets will also serve as key indicators for MYR Group’s growth trajectory.

MYR Group currently trades at $192.55, down from $200.34 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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