Willdan's Margin Expansion Story: Too Hot to Cool Anytime Soon?

Willdan Group, Inc. WLDN continues to build a compelling narrative of margin expansion, and recent results suggest the story may be far from peaking. During the first nine months of fiscal 2025, it delivered robust profitability, driven by strong execution, a favorable product mix and disciplined cost control. Adjusted EBITDA during the said time frame increased year over year by 52.4% to $59.5 million, with adjusted EBITDA margin expanding 360 basis points (bps) to 21.6%.

The primary driver behind the margin momentum is the company’s growing exposure to higher-value energy and infrastructure services. Willdan’s Energy segment, which accounts for roughly 85% of revenues, benefits from long-term utility contracts, recurring program management work and rising demand tied to data center-driven electricity load growth. These engagements typically offer better pricing visibility and execution leverage, supporting steady margin improvement even as the company continues to invest in growth.

Notably, during the first nine months of fiscal 2025, gross profit increased 30.6% year over year, with gross margin expanding 290 bps. This uptrend was backed by improved project delivery efficiencies and scale benefits offsetting inflationary pressures.

Strategic acquisitions, including APG, are further enhancing Willdan’s margin profile by expanding its presence in power engineering and data center infrastructure, areas with attractive economics and long-term demand visibility. With a strong pipeline, rising backlog and exposure to one of the largest infrastructure investment cycles in decades, WLDN’s margin expansion story appears well supported, making it unlikely to cool anytime soon.

Willdan’s Competition Position

Willdan operates as a specialized engineering, energy efficiency and consulting firm focused on utility programs, grid modernization and sustainability services. Given the business areas, it faces substantial competition from renowned names like AECOM ACM and Tetra Tech, Inc. TTEK.

AECOM is a large, diversified global infrastructure consulting and engineering company offering urban planning, construction and program management across transportation, energy and environmental services sectors. With a broad service spectrum, AECOM competes for large-scale infrastructure and consulting contracts where scale and multi-disciplinary capabilities are decisive. On the other hand, Tetra Tech is a global professional services firm concentrated on water, environment and sustainable infrastructure, delivering consulting, engineering and program management solutions. Its science-led approach and strong presence in environmental and resilience projects differentiate it within those segments.

Compared with its peers, Willdan’s more focused energy-centric and utility program expertise allows it to target niche electrification and efficiency markets. On the other hand, AECOM and Tetra Tech leverage broader service portfolios and international scale to compete across wider infrastructure and environmental markets.

WLDN Stock’s Price Performance & Valuation Trend

Shares of this California-based company have surged 68.6% in the past six months, outperforming the Zacks Business - Services industry, the broader Business Services sector and the S&P 500 Index.

WLDN stock is currently trading at a premium compared with its industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 29.61, as shown in the chart below.

Earnings Estimate Revision for WLDN

WLDN’s earnings estimates for fiscal 2025 and fiscal 2026 have remained unchanged over the past 60 days. However, the estimated figures for fiscal 2025 and fiscal 2026 imply year-over-year growth of 70% and 9.6%, respectively.

Willdan stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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