MYR Group (MYRG) Q4 2025 earnings review
A Record-Breaking Finish to a Turnaround Year
MYR Group capped off FY25 with a phenomenal fourth quarter, delivering record revenue of $973.5M (+17% YoY) and net income of $36.5M (+129% YoY). The results firmly cement the company's operational recovery from a challenging 2024 that was plagued by clean energy project losses. Both segments fired on all cylinders, with Commercial & Industrial (C&I) acting as a standout by expanding its operating margin to 6.6%. Buoyed by multi-year tailwinds in data center construction and grid electrification, backlog accelerated sharply to an all-time high of $2.82 billion.
🐂 Bull Case
C&I operating margins reached 6.6% in Q4, well within the raised 5.0%-7.5% target range management laid out for 2026, driven by higher contractual margins and favorable change orders.
After hovering around $2.6B-$2.66B for the first three quarters of 2025, total backlog accelerated sharply by $160M sequentially in Q4 to a record $2.82B, providing immense visibility into 2026.
🐻 Bear Case
Despite margin expansion, management explicitly noted that both gross margins and segment operating margins were partially offset by 'project inefficiencies on certain projects,' showing execution risk remains.
Selling, general and administrative expenses rose 14% YoY in Q4 to $64.6M. While supported by revenue growth, employee-related expenses and incentive comp require monitoring to ensure operating leverage persists.
⚖️ Verdict: 🟢🟢
Highly Bullish. The company is accelerating on the top line, expanding margins methodically, generating massive cash flow, and building a record backlog fueled by long-term secular themes like grid modernization and AI-driven data centers.
Key Themes
C&I Margin March Reaches New Heights
Accelerating. The Commercial & Industrial segment was a star performer. Operating margin has steadily climbed from 3.9% in 24Q4 to 6.6% in 25Q4. Management attributes this to a larger portion of projects progressing at higher contractual margins, many of which are nearing completion, alongside favorable change orders and better-than-anticipated productivity.
Electrification and Data Centers Powering Backlog
Accelerating. After a year of relatively flat sequential growth, total backlog surged 9.6% YoY to $2.82 billion. The C&I backlog grew to $1.80 billion, validating management's previous commentary regarding an 'unprecedented' 20%-50% growth rate in the data center market, alongside robust opportunities in healthcare and transportation infrastructure.
Underlying Project Inefficiencies Persist
Stable. While the headline numbers look flawless, the earnings release repeatedly cited that margin increases in both T&D and C&I were 'partially offset by an increase in costs associated with project inefficiencies on certain projects.' Given MYR's painful history with fixed-price project blowouts in 2024, investors should monitor this language to ensure these are standard operational bumps rather than the start of new problem contracts.
Macro Constraints on Labor and Materials
Stable. As noted in prior quarters, the sheer volume of utility and data center demand is running up against industry-wide constraints in labor availability and long-lead material shortages. This dynamic is extending the timeline for mega-projects out to 2027-2029. While this stretches the backlog favorably over time, it naturally caps the near-term velocity of revenue realization.
Problem Projects Fully Absorbed
Reversing. The significant YoY jump in gross margin (11.4% vs 10.4%) and T&D operating margin (7.4% vs 6.7%) was primarily driven by lapping the disastrous clean energy and specific C&I project losses recognized in late 2024. With those mechanical completions in the rearview mirror, baseline profitability has structurally reset higher.
Other KPIs
Accelerating. An incredible year for cash generation, up nearly 4x from $87.1M in FY24. This was driven by higher net income, robust collection of accounts receivable (+$51M positive swing vs -$134M drag in FY24), and a favorable shift in contract liabilities. This operational cash engine pushed end-of-year cash and equivalents to $150.2M.
Reversing. The Q4 tax rate dropped significantly from 40.9% in the prior year period. Management attributed this to changes in state tax rates used to measure deferred income taxes and lower permanent difference items. The full-year rate settled at a much healthier 26.6% compared to 34.9% in FY24.
Guidance
Decelerating. While the current Q4 release did not update specific figures, the initial FY26 outlook provided in Q3 targeted ~10% top-line growth. Given Q4 revenue grew 17.3% YoY, a 10% target for 2026 represents a slight deceleration, which makes sense as the company faces tougher YoY comparisons now that the 2024 'problem projects' are lapped.
Stable. Management previously raised this target range from 4%-6%. By achieving 6.6% in 25Q4, MYR Group is entering FY26 comfortably in the upper half of this new, elevated guidance bracket.
Key Questions
Details on Project Inefficiencies
The Q4 release specifically cited 'project inefficiencies on certain projects' as an offset to margin gains. Could you provide color on whether these are isolated incidents or related to the broader industry labor and supply chain constraints?
Capital Allocation & Record Cash
With cash soaring to $150M and an essentially unlevered balance sheet, your M&A firepower is significant. Given high multiples in the C&I space mentioned previously, are you leaning more heavily into share repurchases, or is there a robust pipeline of $50-60M tuck-in targets?
Backlog Duration
Total backlog saw a sharp step-up to $2.82 billion. Is the duration of this backlog elongating due to customer equipment lead times, or is the expected 12-month burn rate consistent with historical norms?