MYR Group (MYRG)

Electrical construction and infrastructure services provider MYR Group (NASDAQ:MYRG) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 7% year on year to $950.4 million. Its GAAP profit of $2.05 per share was 7.1% above analysts’ consensus estimates.

Company Overview

Constructing electrical and phone lines in the American Midwest dating back to the 1890s, MYR Group (NASDAQ:MYRG) is a specialty contractor in the electrical construction industry.

Construction and maintenance services companies not only boast technical know-how in specialized areas but also may hold special licenses and permits. Those who work in more regulated areas can enjoy more predictable revenue streams - for example, fire escapes need to be inspected every five years. More recently, services to address energy efficiency and labor availability are also creating incremental demand. But like the broader industrials sector, construction and maintenance services companies are at the whim of economic cycles as external factors like interest rates can greatly impact the new construction that drives incremental demand for these companies’ offerings.

Other companies in the electrical infrastructure industry include Quanta Services (NYSE:PWR), MasTec (NYSE:MTZ), and private company Pika.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, MYR Group grew its sales at a solid 9.7% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. MYR Group’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. MYR Group’s backlog reached $2.66 billion in the latest quarter and averaged 2.8% year-on-year declines over the last two years. Because this number is lower than its revenue growth, we can see the company hasn’t secured enough new orders to maintain its growth rate in the future.

This quarter, MYR Group reported year-on-year revenue growth of 7%, and its $950.4 million of revenue exceeded Wall Street’s estimates by 2.8%.

Looking ahead, sell-side analysts expect revenue to grow 6% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

MYR Group has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 10.8% gross margin over the last five years. Said differently, MYR Group had to pay a chunky $89.16 to its suppliers for every $100 in revenue.

MYR Group’s gross profit margin came in at 11.8% this quarter, marking a 3.1 percentage point increase from 8.7% in the same quarter last year. MYR Group’s full-year margin has also been trending up over the past 12 months, increasing by 2.8 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

MYR Group’s operating margin has risen over the last 12 months and averaged 3.6% over the last five years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports lousy profitability for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, MYR Group’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, MYR Group generated an operating margin profit margin of 4.9%, up 2.6 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

MYR Group’s EPS grew at a remarkable 14.2% compounded annual growth rate over the last five years, higher than its 9.7% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into MYR Group’s earnings quality to better understand the drivers of its performance. A five-year view shows that MYR Group has repurchased its stock, shrinking its share count by 7.4%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For MYR Group, its two-year annual EPS growth of 6.6% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, MYR Group reported EPS of $2.05, up from $0.65 in the same quarter last year. This print beat analysts’ estimates by 7.1%. Over the next 12 months, Wall Street expects MYR Group’s full-year EPS of $6.19 to grow 22.2%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

MYR Group has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.2%, lousy for an industrials business.

MYR Group’s free cash flow clocked in at $65.41 million in Q3, equivalent to a 6.9% margin. This result was good as its margin was 4.9 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although MYR Group hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 14.6%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, MYR Group’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

MYR Group reported $76.21 million of cash and $119 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $214 million of EBITDA over the last 12 months, we view MYR Group’s 0.2× net-debt-to-EBITDA ratio as safe. We also see its $3.94 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing MYR Group beat analysts’ revenue expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its backlog was just in line. Overall, this print had some key positives. The stock remained flat at $225.48 immediately after reporting.

Updated: December 4, 2025 at 10:16 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

MYR Group’s business quality ultimately falls short of our standards. Although its revenue growth was solid over the last five years and Wall Street believes it will continue to grow, its diminishing returns show management's prior bets haven't worked out. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its low gross margins indicate some combination of competitive pressures and high production costs.

MYR Group’s P/E ratio based on the next 12 months is 25.7x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $240.60 on the company (compared to the current share price of $230.51).