MYR Group (MYRG) Q3 2026 earnings review
MYR Group profit nearly doubles, but unpaid bills drain cash
MYR Group, an electrical contractor for utilities and commercial buildings, posted record revenue and profit while its cash generation stalled. Total sales jumped 32% from a year ago as chief executive Rick Swartz integrated the July purchase of Valley Electric and Comet Electric, and underlying sales grew about 19% by our math. Power-line sales sped up and commercial wiring margins hit 8.7%, pushing profit per share up 86%.
| Sales from businesses owned a year ago | +19% (by our math) reported revenue $1.26B, +32% from a year ago |
|---|---|
| Profit per share | $3.82 +86% from a year ago ($2.05) |
| Total backlog | $3.68B +38% from a year ago |
| Outlook | Unchanged qualitative growth outlook maintained in release |
⚖️ Verdict: 🟢 Bullish
The story got better because the power-line division returned to 10% growth and the commercial division absorbed the West Coast acquisitions without diluting its profit margin. The bad news: free cash flow dropped to $9 million as unpaid customer bills built up, funded debt climbed to $216 million, and over half the gross margin gain again came from closeout adjustments on finishing projects.
The question now is whether the jump in commercial margins and backlog comes from a temporary wave of finishing projects and data-center builds or a lasting shift in contract terms. If it is temporary, margins will slip toward 7.5% as current jobs close; if it is lasting, margins will stay near 8.5%. The acquisition footnote in the quarterly filing and fourth-quarter project closeout figures will tell.
🐂 Bull Case
Commercial Wiring Absorbed the Acquisition Without Losing Margin
Commercial and Industrial (C&I), the division that wires data centers, airports, and factories, now brings in 56% of total revenue. On July 1, MYR Group closed its $325 million purchase of Valley Electric and Comet Electric, two West Coast contractors that management previously said would break even on operating profit in their first year because of accounting charges on acquired contracts.
Instead of diluting profitability, C&I expanded its operating margin to 8.7% from 8.5% last quarter and 6.4% a year ago. Segment revenue jumped 57.6% from a year ago to $704.5 million, while segment backlog — contracted work not yet completed — rose by $500 million from last quarter to $2.39 billion. Even if the new subsidiaries contributed half of their $250 million second-half target, underlying C&I sales grew nearly 30% by our math.
This matters because the division absorbed a fourfold jump in company-wide intangible asset write-downs — up to $6.1 million from $1.2 million a year ago — while still lifting its margin near the top of management's 6% to 9% target band. What to watch: the acquisition footnote in the quarterly filing, which will show standalone sales and profit for Valley and Comet.
Transmission Revenue Accelerated While Backlog Held Its Gain
Transmission and Distribution (T&D), which builds power lines and substations for electric utilities, barely grew last quarter even as its order book jumped. In the third quarter, T&D revenue rose 10.2% from a year ago to $554.5 million, accelerating from 3.5% growth in the second quarter. Segment operating profit climbed 24.5% to $51.6 million, holding a 9.3% margin.
The division also kept adding to its order book. T&D backlog rose another $20 million from June to $1.29 billion, up 38.9% from a year ago, even though it counts only 90 days of multi-year utility maintenance contracts. Because large power-line awards won last quarter do not start construction until late 2027, faster revenue growth today shows everyday utility work is picking up on its own.
What to watch: fourth-quarter T&D backlog and commentary on the conference call about permitting for high-voltage lines. A steady backlog above $1.2 billion would confirm that utility maintenance work is replacing completed jobs while the company waits for major transmission projects to break ground next year.
Prior Full-Year Revenue Plan Now Looks Too Low
MYR Group does not publish numerical tables for its outlook in its earnings releases, but on last quarter's call management forecast 13% to 15% full-year revenue growth from businesses owned a year ago, plus about $250 million in second-half sales from the Valley acquisition. Third-quarter revenue of $1.26 billion, up 32.5% from a year ago, outpaced the trajectory that plan pointed to.
If Valley contributed $125 million in the quarter, sales from businesses owned a year ago grew 19.3% by our math, matching the 20.1% pace of the first half. Under the middle of the old full-year target, fourth-quarter underlying sales would have to shrink by 2% from a year ago, even though total backlog just hit a record $3.68 billion.
What to watch: management's updated full-year growth remarks on Thursday's conference call. Raising the full-year organic growth target toward 18% would show the third-quarter surge came from lasting demand rather than early material deliveries that pulled revenue forward from the fourth quarter.
🐻 Bear Case
Commercial Margin Gains Still Rest on Closing Projects
Chief executive Rick Swartz said the quarter showed "the momentum across our business and the strength of our execution". Total operating margin rose 1.9 percentage points from a year ago to 6.8% as contract costs — the labour and materials needed to build projects — fell 1.8 percentage points to 86.4% of revenue, and overhead costs dropped 0.5 points to 6.5%.
However, the company's own disclosures show that closeout adjustments and finishing jobs did much of the work. MYR Group attributed the 1.8-point gross margin rise to "better-than-anticipated productivity and favorable job close outs" as well as higher margins on "certain projects nearing completion". Meanwhile, the contractor still suffered "an increase in costs associated with inefficiencies on certain projects".
- Gross margin: 13.6%, up 1.8 percentage points from 11.8% a year ago
- Boost from project profit estimate revisions: +0.4 percentage points vs -0.6 points a year ago (a 1.0-point year-over-year swing)
- Gross margin excluding estimate revisions: 13.2% vs 12.4% a year ago by our math
Because more than half of the gross margin improvement came from the swing in project estimate revisions and jobs that are now finishing, current profit rates may not last as newer backlog replaces them. What to watch: the net impact of project estimate revisions in the fourth quarter, where a drop back toward zero would test whether regular contracts can hold a 13% gross margin.
Receivables Drained Cash Flow as Borrowing Climbed
While third-quarter net income nearly doubled to a record $60.0 million, free cash flow — operating cash left after buying equipment — dropped 86% from a year ago to $9.2 million. Over the first nine months of the year, the share of profit that turned into free cash flow was just 48% ($75.2 million of free cash flow against $156.7 million of net income).
Cash stayed tied up in unpaid customer bills and unwinding advance payments. Across the first nine months, accounts receivable absorbed $93.9 million of cash and net contract liabilities — upfront customer payments for work not yet done — shrank by $54.8 million. At the same time, MYR Group paid $324.8 million in cash to buy Valley and Comet.
- Third-quarter operating cash flow: $46.1 million, down from $95.6 million a year ago
- Accounts receivable and unbilled contract assets: $1.12 billion, up $272.3 million since December
- Total funded debt: $215.8 million, up from $9.4 million in June and $59.0 million in December
The cash drain and acquisition borrowing pushed quarterly interest expense up to $3.6 million from $1.4 million a year ago and reduced cash on hand to $26.0 million. What to watch: fourth-quarter operating cash flow and whether customer collections rebound before year-end to pay down the new term loan and credit line.
Risks this quarter didn't answer
Six standing concerns from prior quarters cannot be measured from the earnings release alone and await either Thursday's conference call or the full quarterly filing.
- Valley and Comet standalone numbers: the release combines their results into C&I without breaking out their revenue, backlog, or purchase accounting charges, which the quarterly filing's acquisition note will detail.
- Data-center share of C&I: management still gives no breakdown of how much of the $2.39 billion C&I backlog depends on data-center construction.
- Customer concentration: last quarter's filing revealed one T&D customer accounted for 10.8% of total revenue and 15% of receivables; the third-quarter filing will show if that exposure grew.
- Transmission versus distribution split: discontinued in the first quarter, leaving outsiders unable to separate high-voltage line growth from local grid work.
- Large-project permitting and labour availability: whether siting delays or tight electrical labour are shifting the late-2027 start dates for major transmission awards.
👓 Other Themes
Board Approves New $100 Million Share Buyback Plan
After letting its previous $75 million buyback plan expire unused in February, the board approved a new $100 million share repurchase program running from November 4, 2026 through November 3, 2027. Because cash on the balance sheet fell to $26.0 million after the July acquisition, the company said it plans to fund any buybacks "with cash on hand and through borrowings under its revolving credit facility".
Demand Across Core Electrical Infrastructure Markets
Chief executive Rick Swartz credited the company's $3.34 billion in nine-month sales to "healthy demand across our core markets and continued investment in critical electrical infrastructure". Utilities across the United States and Canada are upgrading aging power grids to handle rising electricity loads, while commercial developers continue commissioning complex wiring for data centers, hospitals, and transportation projects.
💲 Other KPIs
EBITDA — earnings before interest, taxes, depreciation, and amortization — jumped 75.4% from a year ago to a record $110.0 million, or $7.00 per diluted share versus $4.01. Growth accelerated from 52.8% in the second quarter and 62.5% in the first quarter as higher project margins combined with the July acquisition.
Return on invested capital over the last twelve months — profit before interest and intangible write-downs divided by average debt and equity — rose to 25.0% from 16.4% a year ago. It ticked down from 26.7% in the second quarter because the $325 million acquisition lifted average invested capital to $811.0 million.
Cash spent on property and equipment rose 22.4% from a year ago to $36.9 million, or 2.9% of revenue. Through the first nine months of 2026, the electrical contractor spent $82.0 million on fleet and equipment to support its expanding backlog, up from $64.5 million in the same period last year.
🔮 Guidance
Unchanged. MYR Group does not issue numerical targets in its earnings releases; chief executive Rick Swartz reiterated that the contractor is positioned to capture infrastructure opportunities as it integrates Valley and Comet. Quantitative updates on full-year organic growth and segment margin bands are typically given on the conference call.
❓ Key Questions
How much did Valley and Comet add to third-quarter results?
The earnings release combines the July 1 acquisitions into the Commercial and Industrial division without stating their standalone revenue, operating profit, or backlog. Investors need those figures to separate underlying growth from acquired volume.
Will management raise its 13% to 15% organic growth plan?
Even if the new subsidiaries contributed $125 million in the third quarter, underlying sales grew about 19% by our math. Leaving the old full-year target unchanged would imply underlying sales shrink in the fourth quarter.
Why did customer receivables absorb so much cash this quarter?
Free cash flow dropped to $9.2 million from $65.4 million a year ago as receivables and unbilled contract assets climbed past $1.1 billion. Listeners on the call will want to know when those bills turn into cash.
What share of the $2.39 billion commercial backlog is data centers?
Commercial and Industrial now makes up 56% of revenue and 65% of total backlog, but the company still does not disclose how much of that work comes from data-center construction versus other commercial projects.