Arcosa (ACA) Q3 2025: Adjusted EBITDA Surges 51% as Stavola Integration and Power Backlogs Drive Record Margins

October 31, 2025 | By EarningsIQ Research

Arcosa’s third quarter delivered record profitability and margin expansion, fueled by the Stavola acquisition and robust demand in utility structures and barges. The company’s strategic portfolio shift toward infrastructure and power markets is yielding visible backlog growth and operational leverage. With leverage back to target and capital flexibility restored, management signals a renewed appetite for both bolt-on M&A and organic investment as sector tailwinds persist into 2026.

Summary

  • Stavola Integration Delivers: Accretive margins and scale from Stavola underpin segment outperformance and portfolio transformation.
  • Power and Barge Backlogs Build: Record utility structures and barge backlogs extend production visibility well into 2026.
  • Capital Flexibility Returns: Debt reduction ahead of schedule positions Arcosa to pursue growth investments and M&A.

Performance Analysis

Arcosa posted a record quarter, with all three segments—Construction Products, Engineered Structures, and Transportation Products—delivering double-digit revenue and EBITDA gains. The standout was Construction Products, driven by the full-year integration of Stavola, aggregates volume and pricing strength, and a sharp 300 basis point margin expansion. Engineered Structures benefited from robust demand for utility structures and improved wind tower throughput, while Transportation Products saw margin lift from a favorable barge mix and operating leverage.

Operating cash flow and free cash flow both surged, enabling $100 million in debt paydown and a rapid return to the company’s leverage target two quarters early. CapEx remained disciplined, focusing on plant conversions and strategic equipment to support future growth. Backlogs in both utility structures and barges reached new highs, locking in production well into 2026 and reinforcing the durability of Arcosa’s infrastructure and power exposure.

  • Construction Margin Expansion: Segment margin reached 29.7%, with Stavola’s 35.2% margin profile setting a new standard for accretive M&A.
  • Backlog Visibility Secured: Utility structures backlog up 11% year-to-date to $462 million; barge backlog up 16% to $326 million.
  • Organic Volume Inflection: Aggregate volumes showed organic improvement for the first time in several quarters, signaling stabilization in core markets.

Despite some lingering cost absorption issues in legacy aggregates, management expects these disruptions are now resolved, positioning the segment for a cleaner Q4 and ongoing margin strength.

Executive Commentary

"Q3 was a record quarter for Arcosa. We delivered double-digit revenue and adjusted EBITDA growth, with all three segments contributing to our strong results. Revenue increased 27% and adjusted EBITDA grew 51%, both excluding the impact of the divested steel components business. Likewise, our record adjusted EBITDA margin of 21.8% was a 340 basis points improvement over the same period last year."

Antonio Carrillo, President and CEO

"Third quarter operating cash flow was $161 million, an increase of 19% year-over-year, and at more than 150% sequentially, as we planned for higher cash flow in the back half of the year. We allocated $100 million to reduce the outstanding balance on the Stavola acquisition term loan... We ended the quarter at 2.4 times net debt to adjusted EBITDA, and looking ahead, we expect to remain within our target range."

Gail Peck, Chief Financial Officer

Strategic Positioning

1. Stavola Acquisition Reshapes Portfolio

The $1.2 billion Stavola deal, aggregates and asphalt supplier in the Northeast, has proven highly accretive, contributing $105 million in adjusted EBITDA at a 35.2% margin over its first full year. This acquisition shifted Arcosa’s construction products mix toward higher-margin, infrastructure-linked geographies, notably New York and New Jersey, now the company’s second largest market. The integration also sets a new baseline for future bolt-on M&A returns.

2. Power Market Momentum and Backlog Strength

Engineered Structures, which includes utility poles and wind towers, is benefiting from secular U.S. power demand growth, data center expansion, and grid modernization. The segment’s backlog for utility and related structures hit a record $462 million, up 11% YTD, while wind tower orders (including $60 million post-quarter) improve production visibility for 2026–2027. Conversion of the Illinois wind tower plant to utility poles and a new galvanizing facility in Mexico are poised to further expand capacity and margin profile.

3. Transportation Cycle Extends Visibility

The inland barge business, both hopper and tank, is capitalizing on an aging U.S. fleet and replacement demand, with backlog up 16% YTD and orders extending well into the second half of 2026. Management emphasized disciplined pricing and capacity allocation, prioritizing margin over volume as demand remains steady but not overheated. This approach is expected to sustain elevated margins through the cycle.

4. Capital Allocation and Balance Sheet Reset

Accelerated debt paydown has restored Arcosa’s leverage to its 2–2.5x target, granting flexibility for both organic investment and further bolt-on acquisitions. Management signaled a preference for remaining at the lower end of the leverage range, while also actively pursuing a pipeline of M&A opportunities in aggregates and recycled materials. Strategic CapEx is being channeled into plant conversions and long-lead equipment to support future demand.

5. Organic Volume Recovery and Pricing Power

Organic aggregates volumes stabilized in Q3, with sequential improvement and strong September exit rates, while pricing remains robust—high single-digit growth for the year and mid-single digit organic gains in Q3. Management expects continued pricing power into 2026, especially as infrastructure demand offsets residential softness and reshoring, energy, and data center trends bolster non-residential volumes.

Key Considerations

Arcosa’s Q3 marks a strategic inflection, with the company now reaping the benefits of portfolio optimization, disciplined capital allocation, and exposure to secular growth themes in infrastructure and power. The following considerations frame the investment context for the coming quarters:

  • Stavola Margin Benchmark: Stavola’s premium margin profile provides a template for future M&A and sets a higher bar for segment profitability.
  • Secular Power Demand Tailwind: Record utility structures backlog and new wind tower orders reflect long-cycle demand from grid modernization and electrification.
  • Barge Replacement Cycle: Elevated backlog and disciplined pricing signal a multi-year replacement cycle, with Arcosa’s capacity well positioned to capture margin-rich demand.
  • Organic Volume Inflection: First organic aggregates volume growth in several quarters, driven by infrastructure, reshoring, and data center projects.
  • Capital Flexibility Restored: Early achievement of leverage target enables Arcosa to pursue both bolt-on acquisitions and capacity investments without balance sheet strain.

Risks

Key risks include potential volatility in public infrastructure funding, weather-driven seasonality (especially in the Northeast), and execution risk in ramping new capacity and integrating acquisitions. Residential end market weakness and delayed project starts could temper near-term aggregates growth, while any slowdown in power infrastructure or barge demand would impact backlog conversion. Management’s confidence is high, but the company remains exposed to macro and policy shifts that could alter demand visibility.

Forward Outlook

For Q4 2025, Arcosa expects:

  • Seasonal step-down in construction margins, especially in weather-sensitive Stavola operations.
  • Continued strong organic and backlog-driven growth in Engineered Structures and Transportation Products.

For full-year 2025, management raised the midpoint of adjusted EBITDA guidance to $580 million, reflecting 32% YoY growth. Revenue guidance has been tightened to $2.86–$2.91 billion, with high single-digit aggregates pricing growth and high single-digit volume growth expected for the year. Management highlighted:

  • Visibility into 2026 production in both utility structures and barges.
  • Ongoing capital allocation toward both organic and inorganic growth, with a bias toward further debt reduction.

Takeaways

Arcosa’s record quarter validates its strategic pivot toward infrastructure and power, with margin and cash flow gains now translating into capital flexibility and renewed growth optionality.

  • Portfolio Transformation Paying Off: Stavola’s integration and infrastructure tailwinds have reset Arcosa’s margin and growth trajectory.
  • Backlog-Driven Visibility: Record utility and barge backlogs extend production certainty into 2026, supporting above-cycle earnings power.
  • Watch for Further M&A and Capacity Expansion: With leverage at target, Arcosa’s pipeline for bolt-on deals and organic investments is now actionable, setting up further scale and margin opportunities in 2026 and beyond.

Conclusion

Arcosa’s Q3 2025 results showcase a company firing on all cylinders, with portfolio repositioning, backlog strength, and operational leverage converging to deliver record margins and cash flow. The early restoration of capital flexibility and clear demand tailwinds in infrastructure and power markets position Arcosa for sustained growth and strategic agility heading into 2026.

Industry Read-Through

Arcosa’s results offer a clear read-through for the broader infrastructure, construction materials, and power equipment industries. The combination of record backlogs in utility structures and inland barges signals enduring demand from grid modernization, electrification, and fleet replacement cycles. Aggregates pricing power and organic volume stabilization suggest that infrastructure and non-residential demand are offsetting residential softness, a theme likely to benefit peers in heavy materials and construction. Finally, the company’s disciplined capital allocation and accretive M&A set a benchmark for industry consolidation as balance sheets strengthen sector-wide.

ACA Industrials Infrastructure Construction Power Backlog Aggregates M&A