MYR Group (MYRG)

Electrical construction and infrastructure services provider MYR Group (NASDAQ:MYRG) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 2.2% year on year to $833.6 million. Its GAAP profit of $1.45 per share was 23.5% 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 experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, MYR Group’s 9.8% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. MYR Group’s recent performance shows its demand has slowed as its annualized revenue growth of 3% over the last two years was below its five-year trend.

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 $2.64 billion in the latest quarter and averaged 1.6% year-on-year growth over the last two years. Because this number is in line with its revenue growth, we can see the company effectively balanced its new order intake and fulfillment processes.

This quarter, MYR Group reported modest year-on-year revenue growth of 2.2% but beat Wall Street’s estimates by 5%.

Looking ahead, sell-side analysts expect revenue to grow 5.8% over the next 12 months. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

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. That means MYR Group paid its suppliers a lot of money ($89.16 for every $100 in revenue) to run its business.

MYR Group’s gross profit margin came in at 11.6% this quarter, up 1 percentage points year on year. On a wider time horizon, however, MYR Group’s full-year margin has been trending down over the past 12 months, decreasing by 1.1 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

MYR Group was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.5% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, MYR Group’s operating margin decreased by 2.3 percentage points 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. MYR Group’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q1, MYR Group generated an operating profit margin of 4.1%, up 1.1 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

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.

Sadly for MYR Group, its EPS declined by 2% annually over the last five years while its revenue grew by 9.8%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

We can take a deeper look into MYR Group’s earnings to better understand the drivers of its performance. As we mentioned earlier, MYR Group’s operating margin improved this quarter but declined by 2.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For MYR Group, its two-year annual EPS declines of 34.6% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, MYR Group reported EPS at $1.45, up from $1.12 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects MYR Group’s full-year EPS of $2.18 to grow 186%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 2.3%, lousy for an industrials business.

Taking a step back, we can see that MYR Group’s margin dropped by 3.8 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the longer-term trend returns, it could signal it’s becoming a more capital-intensive business.

MYR Group’s free cash flow clocked in at $70.22 million in Q1, equivalent to a 8.4% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

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 because of its poor bottom-line (EPS) performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 14%, 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. Over the last few years, MYR Group’s ROIC has unfortunately decreased. 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 $10.9 million of cash and $132.2 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 $128.1 million of EBITDA over the last 12 months, we view MYR Group’s 0.9× net-debt-to-EBITDA ratio as safe. We also see its $3.98 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 were impressed by how significantly MYR Group blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a good quarter with some key areas of upside. The stock traded up 3.5% to $126 immediately after reporting.

Updated: May 16, 2025 at 10:07 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in MYR Group.

We see the value of companies helping their customers, but in the case of MYR Group, we’re out. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and 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 declining EPS over the last five years makes it a less attractive asset to the public markets.

MYR Group’s P/E ratio based on the next 12 months is 26.2x. This valuation tells us a lot of optimism is priced in - you can find better investment opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $158 on the company (compared to the current share price of $164.56), implying they don’t see much short-term potential in MYR Group.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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