MYRG Q1 Earnings Call: Commercial Growth Offsets T&D Solar Weakness, Margin Improvement Continues

Electrical construction and infrastructure services provider MYR Group (NASDAQ: MYRG) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 2.2% year on year to $833.6 million. Its non-GAAP profit of $1.45 per share was 21% above analysts’ consensus estimates.

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StockStory’s Take

MYR Group’s first quarter results reflected continued strength in its Commercial & Industrial (C&I) segment, which benefited from healthy market demand in data centers, healthcare, and infrastructure. Management highlighted a robust project pipeline, citing recent wins in water treatment, solar, and industrial sectors, while also noting a large data center project award expected to be added to backlog in the coming quarters. CEO Rick Swartz emphasized, "We haven’t seen anybody pull back or say they’re pulling back in any way to date," reinforcing the resilience in MYR Group’s core markets despite near-term headwinds in transmission.

Looking ahead, management maintained a cautious stance on certain clean energy and transmission projects, acknowledging ongoing uncertainty around tariffs, inflation, and the rollout of new federal policies. CFO Kelly Huntington explained that while free cash flow was exceptionally strong this quarter due to improved cash collections, future performance will depend on the timing of large projects and ongoing changes in payment terms. Management reiterated its approach of prioritizing organic growth and select acquisitions over immediate share repurchase activity, citing the need for flexibility amid a dynamic bidding environment.

Key Insights from Management’s Remarks

MYR Group’s leadership pointed to segment-specific trends and strategic choices that shaped this quarter’s performance. Revenue growth was driven by C&I outperformance, but transmission within the Transmission & Distribution (T&D) segment remained pressured by selective bidding and clean energy project delays, while margin expansion benefited from project mix and operational discipline.

• C&I Segment Project Momentum: Commercial & Industrial business captured additional work in data centers, healthcare, and water treatment, with management citing strong bidding activity and a recently awarded $90 million data center project in Colorado.
• Transmission Selectivity and Solar Headwinds: T&D’s transmission revenues declined due to continued selectivity on clean energy projects, with management indicating some pausing by developers in response to tariff and inflation concerns.
• Margin Expansion from Project Mix: Higher gross margins resulted from a larger share of projects nearing completion at higher contractual margins, along with favorable change orders and job closeouts in both segments.
• Backlog Dynamics Split by Segment: C&I backlog increased, reflecting strong project wins, while T&D backlog saw a modest decline tied to the wind-down of large clean energy projects and more selective bidding behavior.
• Capital Allocation Flexibility: The company exhausted its current share repurchase program but is not announcing a new one, instead focusing on supporting organic growth opportunities and maintaining readiness to pursue acquisitions as conditions warrant.

Drivers of Future Performance

MYR Group’s management projects steady performance, with future growth driven by strength in core commercial markets and continued discipline in project selection, while monitoring risks from tariffs and shifting customer preferences.

• Core Market Demand: The C&I segment is expected to benefit from ongoing demand in data centers, healthcare, and industrial markets, supported by positive construction forecasts and healthy bidding pipelines.
• Transmission Uncertainty and Solar Exposure: T&D growth may be tempered by continued softness in clean energy transmission, as management monitors the impact of tariffs and evolving federal policy on project timing and developer appetite.
• Margin Sensitivity to Project Mix: Profitability will depend on maintaining a favorable mix of higher-margin projects and managing cost risks from potential changes in tariff structures and inflation, especially within fixed-price contracts.

Top Analyst Questions

• Atidrip Modak (Goldman Sachs): Asked about the C&I backlog and pipeline given macro uncertainties; management said client conversations remain active, with no signs of pullback, but acknowledged ongoing discussions about tariffs and inflation.
• Sangita Jain (KeyBanc): Sought clarity on the sustainability of strong free cash flow and the rationale for not extending the share buyback; CFO Kelly Huntington cited improved cash collections but warned of variability due to contract terms and project timing.
• Sangita Jain (KeyBanc): Queried whether T&D segment margins can remain at current levels as higher-margin projects roll off; CEO Rick Swartz indicated expectations to maintain mid-range margin targets by year-end despite project mix shifts.
• Jonathan Braatz (KCCA): Inquired about the effect of federal policies and tariffs on utility customer behavior for clean energy projects; management noted some pausing in certain geographies but emphasized continued selectivity and stable core business.
• Brian Brophy (Stifel): Asked about the impact of tariffs on C&I cost structure and margins; management said newer contracts have stronger protections, but acknowledged the situation is evolving and being closely monitored.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the pace at which data center and infrastructure project awards translate into backlog and revenue for the C&I segment, (2) signs of stabilization or renewed growth in the T&D backlog as clean energy headwinds play out, and (3) management’s ability to maintain or improve margins amid changing project mix and potential tariff impacts. Ongoing capital allocation decisions, especially regarding acquisitions versus share repurchase, will also be key indicators of strategic flexibility.

MYR Group currently trades at a forward P/E ratio of 26.2×. At this valuation, is it a buy or sell post earnings? See for yourself in our free research report.

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