Everus Construction Group (ECG) Q3 2026 earnings review
Everus data center backlog jumps, while utility orders slip
Everus Construction Group, which installs electrical wiring in commercial buildings and power lines for utilities, grew faster in the third quarter instead of slowing down as its prior plan implied. Sales from businesses owned a year ago rose 36%, while profit per share jumped 61% on better job-site execution and a billing settlement. Chief executive Jeffrey S. Thiede raised the full-year outlook for a third time after closing the purchase of prefabrication specialist Epsilon Industries.
| Sales from businesses owned a year ago | $1.34B +35.8% from a year ago |
|---|---|
| Backlog excluding 2026 acquisitions | $4.74B +60.9% from a year ago (by our math) |
| EBITDA margin | 10.1% 9.0% a year ago |
| Full-year revenue outlook | Raised $450M middle of the range: 34.8% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because the feared second-half slowdown and margin drop did not happen. Even without counting acquired contracts, the order backlog expanded 61% from a year ago by our math, and management lifted its implied fourth-quarter EBITDA margin to 9.5% from its prior 8.5% assumption. One caution: the utility power-line division saw its backlog shrink again, leaving growth even more dependent on data center construction.
The question now is how much of the 10.1% profit margin came from one-time closeout gains on finishing older contracts versus better pricing on current work. Either ~10% margins are the new baseline from factory prefabrication and full schedules, or profit margins will slip back toward 8.5% once those closeout adjustments fade. The contract-estimate footnote in the third-quarter filing and fourth-quarter margins will settle it.
🐂 Bull Case
Data Center Wiring Lifts Underlying Sales 36%
Everus gets most of its revenue from its Electrical and Mechanical (E&M) division, which installs wiring, piping and fire systems in commercial buildings. Chief executive Jeffrey S. Thiede said project demand stayed strong across its markets, "including the data center, high tech and hospitality submarkets". Even after stripping out companies bought this year, sales from businesses owned a year ago accelerated for a second straight quarter.
- Total sales from businesses owned a year ago: $1.34 billion, up 35.8% from a year ago
- E&M underlying sales: $1.09 billion, up 42.3% from a year ago
- Acquired revenue in Q3: $43.7 million from SE&M Constructors and Epsilon Industries
- Implied Q4 total revenue: about $1.40 billion at the middle of the range, up 38.1% by our math
This matters because the previous full-year plan pointed to second-half sales growth slowing below 22%. Instead, underlying sales sped up from 30.0% in the second quarter to 35.8% in the third, proving that data center construction is still speeding up rather than hitting a wall.
What to watch: fourth-quarter underlying sales growth excluding SE&M and Epsilon. A reading above 30% would show that existing operations are carrying the higher full-year plan into 2027.
Backlog Grew 61% Before Counting Acquisitions
Backlog is the total dollar value of signed construction contracts that Everus has not yet completed. Total backlog reached $5.48 billion, up 86.1% from a year ago, and acquisitions completed during the first nine months of 2026 added $742.3 million of that total.
Stripping out those acquired contracts leaves $4.74 billion of backlog by our math, which is still up 60.9% from a year ago. In the E&M division alone, backlog excluding acquisitions reached $4.37 billion, up 70.0% from last year and up about $290 million from June. Because customers are booking new electrical work faster than crews complete existing jobs, the order book keeps growing even at record revenue levels.
What to watch: the share of backlog scheduled to turn into revenue within 12 months in the third-quarter filing. If that share stays near 80%, the bigger order book will turn into 2027 revenue quickly rather than stretching out over many years.
Epsilon Deal Closes and Adds Prefabrication
On September 1, Everus closed its purchase of Epsilon Industries, following its April purchase of SE&M Constructors. Thiede said Epsilon "significantly expands our off-site modular construction and prefabrication capabilities", which let workers build electrical and mechanical systems in a factory before shipping them to a job site.
The company spent $380.5 million in cash across both deals during the first nine months and drew $100 million on its credit line. Even after borrowing for the deals, net debt sits at 0.7 times trailing 12-month EBITDA (earnings before interest, taxes, depreciation and amortization), well below management's long-term target of 1.5 to 2.0 times. That leaves room for more deals while factory prefabrication helps ease job-site labor shortages.
What to watch: the purchase price allocation table in the third-quarter filing for Epsilon's separate revenue and profit contribution during September. Strong margins there would show that factory-built systems earn more than standard site work.
Profit Margins Beat the Plan Again
Three months ago, management said its full-year plan assumed an EBITDA margin of about 8.5% for the second half of 2026. Instead, the construction group delivered 10.1% in the third quarter, up 1.1 percentage points from a year ago, and its raised full-year outlook now implies 9.5% for the fourth quarter by our math.
Gross margin rose 2.2 percentage points to 14.8% because the cost of making and installing its projects fell to 85.2% of revenue from 87.4%. That improvement included "a dispute resolution on prior billings that drove a $7.6 million net benefit", the company said, but gross margin still rose 1.7 points to 14.3% without it by our math. Those job-site gains easily covered a 0.6-point rise in overhead and administrative costs to 5.8% of sales from higher bonuses and deal fees.
What to watch: fourth-quarter EBITDA margin against the implied 9.5% target. Another beat would show that ~10% margins are becoming the new baseline rather than a temporary burst from project closeouts.
🐻 Bear Case
Utility Grid Backlog Keeps Shrinking
Everus runs a second division, Transmission and Distribution (T&D), which builds overhead and underground power lines for utilities. Thiede said third-quarter growth was driven by both divisions, and T&D sales rose 14.4% from a year ago to $255.6 million "particularly in the transmission, distribution and underground submarkets, partially offset by lower revenues in the transportation end market".
Yet T&D backlog fell to $371.3 million, down 1.2% from a year ago and down 4.4% from June by our math. While the electrical building division has nearly Doubled its order book over the past year, the utility division is burning through its signed work faster than it replaces it. That leaves Everus leaning ever more heavily on data center and commercial building cycles.
What to watch: year-end T&D backlog in the fourth-quarter report. Another sequential drop below $371 million would point to slower utility revenue growth in 2027.
Risks this quarter didn't answer
Four standing concerns depend on footnote tables that appear in the quarterly filing rather than the earnings release, so they are not readable yet.
- Data center and top-customer concentration: the release gives no share for data centers or for the single E&M customer that made up 17.6% of sales last quarter.
- Prior-period estimate catch-ups: the release notes a $7.6 million billing dispute benefit, but the full net benefit from revising cost estimates on older contracts awaits Note 3 of the filing.
- Fixed-price contract exposure: the share of revenue under fixed-price terms (~51% last quarter) is not in the release.
- Three-year-old $31.3 million withheld payment: the release does not say whether the $7.6 million dispute resolution settled this October 2023 billing dispute or a different contract.
💲 Other KPIs
Net contract liabilities — cash customers have paid upfront for construction work not yet performed — rose 93.3% from a year ago by our math, more than double the 40.3% pace of revenue growth. Upfront customer billings have climbed from $305.1 million in December and $418.8 million in June, funding new project starts without tying up the company's own cash.
Free cash flow for the first nine months nearly tripled from $74.8 million a year ago as higher profits and upfront customer payments lifted operating cash flow to $267.3 million. By our math, third-quarter free cash flow was $54.2 million (3.9% of sales) after $167.0 million in the first half, as summer workload growth absorbed $249.6 million in nine-month receivables.
Uncollected customer bills rose 44.0% from a year ago by our math and 39.1% from December, moving slightly ahead of the 40.3% revenue increase. The construction group said the increase came from the 2026 acquisitions and heavier summer billing activity, while its allowance for doubtful accounts fell to $3.7 million from $5.3 million at year-end.
🔮 Guidance
Raised. The middle of the full-year sales plan moved up $450 million, calling for 34.8% growth over 2025 by our math. That leaves about $1.40 billion of revenue for the fourth quarter, up 38.1% from a year ago. It is the third raise this year, and each increase has been larger than the last: +$200 million in Q1, +$250 million in Q2, and +$450 million in Q3, aided by the Epsilon closing.
Raised. The middle of the profit outlook rose $72.5 million to $490 million, or 53.2% growth for the year by our math. That leaves $132.3 million for the fourth quarter (+56.0% from a year ago) at an implied 9.5% margin, down from 10.1% in Q3. It is the third raise of 2026 (+$25.0M, +$65.0M, +$72.5M), and if the company's 1.7-point margin beat record holds, Q4 margins would top 11%.
Unchanged. Everus kept its equipment and facility spending plan at $90 million to $100 million, which now equals 1.8% to 2.0% of planned sales, down from 1.9% to 2.2% previously. Because the group spent $53.4 million in the first nine months, the full-year range leaves $36.6 million to $46.6 million for the fourth quarter by our math.
❓ Key Questions
How much did Epsilon add to Q3 sales and backlog?
The release pools SE&M and Epsilon into $43.7 million of third-quarter revenue and $742.3 million of acquired backlog. Subtracting SE&M's roughly $100 million backlog from April leaves about $642 million from Epsilon, and investors need Epsilon's monthly revenue run-rate to model 2027.
How much of Q3 profit came from older contract adjustments?
In the second quarter, favorable cost revisions on work performed in earlier periods accounted for about two-thirds of profit per share. Beyond the $7.6 million billing dispute gain, investors need the Note 3 footnote table to see if ongoing project margins improved.
Did the $7.6M settlement resolve the 2023 disputed receivable?
Everus has carried $31.3 million of uncollected revenue from an October 2023 time-and-materials dispute on its balance sheet. Management should clarify on the call whether this quarter's $7.6 million billing dispute resolution closed that account or came from a separate job.
What share of the $5.1B electrical backlog is data centers?
Electrical and mechanical backlog has nearly doubled in a year to $5.11 billion, and one customer accounted for 17.6% of sales last quarter. Knowing the data center share and how much backlog extends beyond 12 months will show how exposed 2027 is to a cloud-spending pause.