MYRG Q3 Deep Dive: Margin Rebound and Growth Outlook Amid Backlog Decline

Electrical construction and infrastructure services provider MYR Group (NASDAQ:MYRG) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 7% year on year to $950.4 million. Its non-GAAP profit of $2.05 per share was 7% above analysts’ consensus estimates.

Is now the time to buy MYRG? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

MYR Group’s third quarter results were met with a negative market reaction, despite the company surpassing Wall Street’s expectations for both revenue and non-GAAP profit. Management pointed to improved project execution, particularly in the Commercial & Industrial segment, and better-than-expected productivity as key drivers of the quarter’s margin expansion. CEO Rick Swartz acknowledged lingering pressures, citing that “costs associated with project inefficiencies, unfavorable change orders and inclement weather” partially offset these operational gains. The quarter also saw a year-over-year decline in backlog, which contributed to investor caution.

Looking ahead, management’s guidance is shaped by expectations for continued growth in both core segments, underpinned by robust customer demand in electrical infrastructure and data centers. Swartz stated that MYR Group is forecasting “10%-ish revenue growth” next year, with margin profiles expected to trend higher. However, management remains mindful of potential constraints, noting that “large projects are unlikely to start until 2027” and highlighting ongoing labor and material availability challenges as factors that could impact execution in future periods.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to a combination of strong project execution and favorable market conditions in core end markets, while noting that backlog softness and operational headwinds remain key themes.

• C&I margin expansion: The Commercial & Industrial segment delivered higher-than-expected margins, benefiting from positive job closeouts and improved productivity, even in the face of some negative change orders. CFO Kelly Huntington stated the segment is trending at “the upper half of the target range” for margin this year.

• Transmission and Distribution (T&D) resilience: The T&D segment maintained steady performance, aided by a healthy mix of master service agreements and ongoing investment by utilities in grid upgrades. COO Brian Stern highlighted that “bidding activity remains healthy,” but large project awards have yet to materialize.

• Data center market momentum: Management emphasized continued wins in data center, healthcare, and transportation projects. Don Egan, C&I COO, noted that “unprecedented growth in spending on data centers is expected to continue,” but also stressed the importance of diversification across multiple core markets.

• Operational headwinds: Both segments faced increased costs from project inefficiencies, unfavorable change orders, and adverse weather, which partially offset margin improvements. Swartz described the environment as “a balancing act between labor availability and material availability.”

• Capital allocation priorities: The company continues to prioritize growth investments, with higher capital expenditures directed toward T&D opportunities. Huntington reiterated that MYR Group is “in a great position” to pursue acquisitions, support organic growth, and selectively repurchase shares, given its strong balance sheet and low leverage.

Drivers of Future Performance

MYR Group expects its growth trajectory to be supported by infrastructure investment, but execution will depend on navigating labor and material constraints and realizing new project wins.

• Infrastructure and utility investment: Management believes ongoing capital spending by utilities, especially on grid modernization and transmission upgrades, will remain a central growth driver. Swartz cited industry forecasts projecting “$208 billion on grid upgrades and expansions in 2025,” positioning MYR Group to benefit from long-term infrastructure trends.

• Balanced end-market exposure: The company’s strategy to diversify across data centers, healthcare, wastewater, and transportation construction is expected to help mitigate the risk of overreliance on any single market. Egan noted that while data centers are growing rapidly, other core markets are “very strong” and will remain focus areas.

• Execution risks and backlog visibility: Management acknowledged that backlog growth has slowed and that labor and material shortages could limit the pace of project execution. Delays in large project starts, particularly in T&D, are expected until 2027 and beyond, which may weigh on near-term visibility.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) whether MYR Group can secure large-scale transmission projects to bolster backlog, (2) how effectively the company manages labor and material constraints amid elevated bidding activity, and (3) the pace of margin improvement in both T&D and C&I segments. Continued success in diversifying project wins across core end markets will also be a key indicator of future sustainability.

MYR Group currently trades at $214.25, down from $226.54 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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