MYR Group (MYRG) Q3 2025: Backlog Rises 2.5% as T&D Margins Hit 8.2%
MYR Group delivered a record-setting Q3, driven by margin expansion and robust backlog growth in both Transmission & Distribution (T&D) and Commercial & Industrial (C&I) segments. Management’s guidance upgrade for C&I margins and a 10% revenue growth outlook signal confidence in core markets, even as large project timing shifts into 2027 and beyond. Capital allocation remains disciplined, with the balance sheet positioned for both organic growth and selective M&A as industry tailwinds persist.
Summary
- C&I Margin Guidance Raised: Management now expects a 5%–7.5% range for C&I margins in 2026, reflecting both execution and market strength.
- T&D Backlog and Margin Expansion: T&D operating margin more than doubled, supported by favorable project closeouts and steady MSA volume.
- Growth Outlook Unwavering: Leadership forecasts 10% revenue growth for 2026, with large project awards expected post-2026.
Performance Analysis
MYR Group’s third quarter performance was marked by record net income and EBITDA, underpinned by both revenue growth and significant margin improvement. Total revenue increased 7% year over year, with T&D and C&I segments contributing 53% and 47% of total revenue, respectively. T&D revenue grew 4%, while C&I outpaced at 10% growth, driven by fixed-price contract wins and strong execution in core verticals.
Gross margin expanded to 11.8%, up from 8.7% a year ago, reflecting both operational recovery and project-level outperformance. T&D operating income margin rose to 8.2% (from 3.6%), while C&I reached 6.4% (from 5.0%). Favorable change orders, strong productivity, and positive job closeouts were key contributors, offsetting pockets of inefficiency and weather-related costs. Free cash flow surged to $65 million, supporting a balance sheet with low leverage and ample liquidity for growth investments.
- Margin Rebound in Both Segments: The prior year’s drag from specific clean energy and legacy projects reversed, with productivity and closeouts driving upside.
- Backlog Growth Signals Visibility: Total backlog climbed to $2.66 billion, up 2.5% year over year, with C&I backlog comprising 65% of the total.
- Capital Allocation Remains Growth-Focused: Higher capex this quarter reflects investment in T&D capacity, while buybacks remain opportunistic.
Overall, MYR’s quarterly results demonstrate both operational resilience and strategic positioning for sustained expansion, with management’s margin and growth outlooks reflecting confidence in end-market demand.
Executive Commentary
"Our teams continue to execute projects with operational excellence, and expand existing client relationships through master service and alliance agreements across our districts. Bidding activity remains healthy as we strategically pursue and capture new opportunities that position us for potential future growth."
Rick Swartz, President and Chief Executive Officer
"We believe that our credit facility, strong balance sheet, and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions, and opportunistically repurchase shares."
Kelly Huntington, Senior Vice President and Chief Financial Officer
Strategic Positioning
1. Master Service Agreements Anchor T&D Revenue
MSAs, long-term recurring service contracts, accounted for 60% of T&D revenue, providing revenue stability and visibility. Management noted that recent project awards were primarily small to midsize, maintaining a balanced workload and reducing reliance on lumpy large projects. This approach enables MYR to manage labor and material risk while sustaining a consistent margin profile.
2. C&I Market Diversification and Data Center Opportunity
C&I growth is broad-based, spanning data centers, healthcare, education, transportation, and wastewater. While data centers are a headline growth driver, management emphasized that other verticals remain equally strong, with no single end-market expected to dominate the mix. The company’s strategy to remain diversified insulates against sector-specific volatility and keeps the project pipeline robust.
3. Margin Expansion Driven by Execution and Market Dynamics
Upgraded C&I margin guidance to 5%–7.5% reflects both operational improvements and favorable market conditions. Management attributes the higher range to a blend of disciplined project execution and expanding market opportunities, signaling a structural shift from historical levels. T&D margins are also expected to operate in the middle of their 7%–10.5% range, barring major project mix changes.
4. Capital Deployment: Organic Growth, Targeted M&A, and Opportunistic Buybacks
MYR’s balance sheet strength—low leverage and high liquidity—enables simultaneous pursuit of organic growth, selective M&A, and opportunistic share repurchases. Management reiterated a disciplined approach to acquisitions, prioritizing cultural and structural fit over scale, with a target range of $50–600 million in annual revenue for potential deals. Capex is trending higher to support T&D growth, but remains calibrated to market opportunity.
5. Industry Tailwinds and Long-Cycle Visibility
Sector forecasts point to $1.1 trillion in utility capital investment from 2025–2029, with $208 billion targeted at grid upgrades in 2025 alone. MYR’s customer base is engaging in long-term project planning, with large transmission awards expected to ramp after 2026. Management sees the current cycle as elongated, with growth visibility extending well into the next decade.
Key Considerations
The quarter’s results reflect both cyclical and structural forces at play across MYR’s core markets. Management’s commentary and Q&A responses reveal several underlying factors shaping the outlook:
Key Considerations:
- Record Cash Flow Enables Flexibility: Elevated operating and free cash flow provide a cushion for capex, M&A, and buybacks without stressing the balance sheet.
- Project Mix Remains Balanced: Absence of large project wins this quarter keeps the backlog weighted toward MSAs and midsize jobs, reducing volatility.
- Labor and Material Availability as Future Levers: Management flagged both skilled labor and material lead times as constraints that could impact project timing and margins industry-wide.
- Acquisition Pipeline Active but Selective: M&A remains on the table, but only for the right cultural and strategic fit, reflecting discipline amid rising industry multiples.
Risks
Labor shortages and supply chain delays remain structural risks for both T&D and C&I segments, potentially limiting the pace of backlog conversion and margin expansion. Additionally, the timing of large project awards is uncertain, with most major new work not expected until 2027 or later. Competitive pricing pressure and customer concentration in utility markets could also temper upside if market dynamics shift.
Forward Outlook
For Q4 2025 and full year 2026, MYR Group guided to:
- 10% company-wide revenue growth, balanced between T&D and C&I segments
- C&I operating margin in the 5%–7.5% range, up from prior guidance
- T&D margins expected in the middle of the 7%–10.5% range
Management highlighted several factors that will shape results:
- Continued strength in core verticals and healthy bidding activity
- Large transmission project awards likely to ramp after 2026, extending growth visibility
Takeaways
MYR Group’s Q3 results and commentary reinforce its position as a beneficiary of multi-year industry tailwinds, with disciplined execution and capital allocation underpinning the growth narrative.
- Backlog and Margin Expansion: The company is capitalizing on both recurring MSA work and diversified C&I demand, supporting margin and backlog growth without reliance on large, lumpy projects.
- Strategic Flexibility: A strong balance sheet enables simultaneous investment in organic capacity, M&A, and share repurchases, while maintaining low leverage.
- Long-Cycle Opportunity: Investors should watch for the timing and mix of large transmission awards, as well as management’s ability to navigate labor and supply chain constraints as the cycle matures.
Conclusion
MYR Group’s Q3 2025 performance validates its multi-pronged growth strategy, with upgraded margin guidance and a robust backlog providing visibility into 2026 and beyond. The company’s operational discipline, market diversification, and capital strength position it to capture the benefits of unprecedented utility and infrastructure investment cycles.
Industry Read-Through
MYR’s results and outlook highlight the intensifying capital investment cycle in North American utility and infrastructure markets, with transmission and grid modernization spending accelerating. The company’s margin recovery and backlog growth are instructive for peers in specialty contracting, electrical infrastructure, and engineering services, signaling a rising tide for well-positioned players. Labor and material constraints, along with disciplined capital allocation, will remain critical differentiators as the cycle extends, with sector-wide implications for project timing, margin capture, and M&A activity.