MYR Group outlines 10% revenue growth target for 2026 while raising C&I margin guidance

Earnings Call Insights: MYR Group Inc. (MYRG) Q3 2025

MANAGEMENT VIEW

* CEO Richard Swartz emphasized the company's solid third quarter performance, attributing it to "the strength of our long-term customer relationships and a strong market position" and ongoing operational excellence. Swartz cited robust bidding activity and client expansion through master service and alliance agreements as key to "potential future growth."
* Swartz highlighted favorable industry projections, referencing the Edison Electric Institute's forecast of more than $123 billion in U.S. transmission spending from 2025-2027 and nearly $208 billion on grid upgrades and expansions in 2025.
* Swartz discussed healthy growth forecasts for the C&I segment, specifically in data centers, transportation, healthcare, education, and wastewater construction, supported by steady backlog and expansion in core markets.
* CFO Kelly Huntington reported third quarter 2025 revenues of $950 million, an increase of $62 million or 7% year-over-year. She stated, "Our third quarter T&D revenues were $503 million... C&I revenues were $447 million, an increase of 10% compared to the same period last year."
* Huntington noted gross margin improvement to 11.8%, up from 8.7% in the prior-year quarter, attributing the rise to "better-than-anticipated productivity, favorable change orders and favorable job closeouts."
* Huntington also disclosed record net income of $32 million and EBITDA of $63 million for the quarter.
* COO Brian Stern described "steady bidding activity" and a strong T&D backlog, citing project wins across multiple subsidiaries and U.S. regions, driven by utilities' ongoing investment in infrastructure.
* COO Don Egan referenced continued strength in the C&I segment with new project awards in core markets including data centers, healthcare, clean energy, warehousing, higher education, and transportation.

OUTLOOK

* Swartz projected "10%-ish revenue growth" company-wide for next year and increased the C&I margin profile forecast to "the mid-range of kind of that 5% to 7.5%," up from previous guidance. He indicated that the T&D margin would "probably operate in the mid-ish range" of 7% to 10.5%.
* Huntington elaborated, stating "we are expecting that we'll be in the upper half of the target range for this year of the 4% to 6% for full year '25," and confirmed the raised expectation for next year.
* Management expects growth to be "pretty equally spread between C&I and T&D as we see it today," with no anticipated pullback in client work or project availability.

FINANCIAL RESULTS

* The company reported third quarter revenues of $950 million. T&D revenues reached $503 million with $293 million from transmission and $210 million from distribution. Master service agreements continued to account for approximately 60% of T&D revenue.
* C&I revenues were $447 million, primarily fueled by increased revenue on fixed price contracts.
* Gross margin was 11.8%, with T&D operating income margin at 8.2% and C&I operating income margin at 6.4%.
* SG&A expenses increased to $66 million, mainly due to higher employee incentive compensation and expenses to support growth.
* Net income for the quarter was $32 million, or $2.05 per diluted share, and EBITDA was $63 million. Operating cash flow reached $96 million, and free cash flow was $65 million.
* Total backlog as of September 30, 2025, was $2.66 billion, with $929 million in T&D and $1.73 billion in C&I.
* Working capital stood at $267 million, funded debt at $72 million, and borrowing availability at $400 million.

Q&A

* Sangita Jain, KeyBanc, questioned C&I margin sustainability and future targets. Swartz responded: "our margin profile is probably... in the mid-range of kind of that 5% to 7.5%. So we're upping that a little bit as we forecast out next year with probably 10-ish percent growth, both in our C&I and T&D areas."
* Jain inquired about the size and impact of new T&D awards. Swartz clarified these were "small and midsized" and did not change the mix between MSA and non-MSA work.
* Andrew Wittmann, Baird, pressed on data center market evolution and capital deployment for M&A. Swartz indicated data centers "could increase" but do not outpace other C&I segments. On M&A, he said, "it's got to fit us from a cultural fit and then from a structural fit... we're also in a really good position to pursue acquisitions that are the right fit."
* Jon Braatz, Kansas City Capital, queried the drivers of higher C&I margins. Swartz attributed gains to both "execution" and "market... expansion in our margins."
* Brian Brophy, Stifel, asked about revenue growth excluding solar. Swartz and Huntington confirmed T&D growth is running "a little ahead" of expectations, with C&I "right in that range."
* Ati Modak, Goldman Sachs, sought clarity on revenue growth run rate and capital allocation. Swartz responded, "that's how we're forecasting it right now with that kind of 10-ish percent overall growth." Huntington explained capital is prioritized for organic growth, capex, and targeted acquisitions.
* Brian Russo, Jefferies, asked about the role of MSAs in 2026 T&D growth and labor leverage in future years. Swartz confirmed increased MSA spend is a component and noted a continued focus on treating return clients fairly while seeking productivity gains.

SENTIMENT ANALYSIS

* Analysts displayed a slightly positive to neutral tone, with repeated interest in margin sustainability, growth targets, backlog composition, and capital allocation. Questions were direct and focused on quantifying future performance, with minimal skepticism.
* Management maintained a confident and upbeat tone in both prepared remarks and Q&A, frequently using language such as "we are expecting," "we see," and "we continue to." Swartz and Huntington provided detailed, direct responses, amplifying guidance and confirming positive operational momentum.
* Compared to the previous quarter, management's confidence level increased, particularly around raising margin targets and growth forecasts, while analysts maintained a steady, data-driven line of questioning.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for C&I margins was raised from a prior range of 4% to 6% to a new target of 5% to 7.5% for the next year.
* Company-wide revenue growth target increased from "high single digits" to "10%-ish" for 2026, with both C&I and T&D segments contributing.
* Gross margin improved from 11.5% in Q2 to 11.8% in Q3, and net income and cash flow both reached record levels.
* Backlog grew slightly from $2.64 billion to $2.66 billion, with both segments maintaining healthy levels.
* Management's sentiment shifted from steady to more confident, particularly around growth visibility and operational execution.
* Analyst focus pivoted toward forward margin guidance, sustainability of growth, and strategic capital deployment.

RISKS AND CONCERNS

* Management acknowledged project inefficiencies, unfavorable change orders, and inclement weather as factors that partially offset margin gains.
* Labor and material availability were cited as ongoing challenges, with Swartz noting "it's a balancing act between kind of the labor availability in the market, but also the material availability."
* No large T&D projects were added to backlog, and project timing remains "lumpy."
* Analysts repeatedly questioned the ability to sustain margin improvements and the impact of potential labor shortages in future years.

FINAL TAKEAWAY

MYR Group delivered record revenues, margins, and cash flows in Q3 2025, supported by strong execution in both T&D and C&I segments. Management raised its C&I margin guidance and set a company-wide revenue growth target of approximately 10% for 2026, reflecting constructive market dynamics and customer demand. The company's balance sheet and backlog position it to pursue both organic growth and strategic acquisitions, while operational focus remains on executing projects with excellence and capitalizing on healthy bidding activity across core markets.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/myrg/earnings/transcripts]

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