Hook / Thesis
MYR Group runs an electrical construction franchise that sits squarely in front of the U.S. energy infrastructure spending cycle. The company is reporting sequential revenue gains and a clear rebound in margins: Q3 2025 revenue of $950.4m (+~6.9% vs Q3 2024) and operating income of $46.3m, a sharp improvement versus the year-ago operating profit of $20.4m. Cash generation is solid too — operating cash flow in the latest quarter was $95.6m.
That said, the stock has already rerated. Using diluted average shares reported in the quarter (about 15.631m) and the recent close around $256.95 (10/29/2025), the market capitalization works out to roughly $4.0 billion. If you annualize the most recent quarter's diluted EPS of $2.05 (x4 = ~$8.20), the simple price-to-earnings reads in the low-30s. Bottom line: fundamentals are improving, but the valuation is elevated and deserves respect when sizing a trade.
What MYR does and why the market should care
MYR Group is a U.S.-based holding company providing specialty electrical construction via two main businesses: transmission & distribution (T&D) and commercial & industrial work. The T&D segment handles design, engineering, procurement, construction, upgrades and maintenance on transmission and distribution networks and substation facilities. This positions MYR as a direct beneficiary of utility capital spending to harden the grid, integrate renewables and expand transmission to connect remote wind and solar resources.
The market cares because the combination of steady contract work, recurring maintenance and a secular push to electrify and decarbonize creates a multi-year addressable opportunity set. For MYR, that is translating into:
- Sequential revenue momentum: Q1 2025 revenue $833.6m, Q2 2025 $900.3m, Q3 2025 $950.4m — a clear step-up through the year.
- Margin expansion: gross profit rose to $111.9m in Q3 2025 (gross margin ~11.8%) from $77.3m a year earlier (~8.7% gross margin), reflecting better price/cost mix and execution.
- Improved operating leverage: operating income rose to $46.3m in the latest quarter (operating margin ~4.9%), versus $20.4m in Q3 2024 (operating margin ~2.3%).
Execution and working-capital discipline are important for contractors. The balance sheet shows manageable leverage: long-term debt is modest at $71.98m and shareholders' equity is roughly $617.6m as of 9/30/2025, while operating cash flow in the quarter was healthy at $95.6m.
Support from the numbers
Key line items from the most recent reported quarter (fiscal Q3 ended 09/30/2025; filed 10/29/2025):
- Revenues: $950.4m
- Gross profit: $111.892m
- Operating income: $46.271m
- Net income: $32.094m (net attributable to parent)
- Diluted EPS: $2.05 (diluted average shares ~15.631m)
- Operating cash flow (quarter): $95.59m
- Long-term debt: $71.976m
- Assets / Liabilities snapshot: Assets ~$1.645b, Liabilities ~$1.028b
Comparing the Q3 2025 results to Q3 2024 highlights the turnaround: revenue up ~7% year-over-year (from $888.0m), gross profit improved by roughly $34.6m, and operating income more than doubled. Those are not trivial gains for a contractor; they reflect better job mix, pricing and tighter execution.
Valuation framing
We estimate market cap at approximately $4.0b (diluted average shares 15.631m x recent price ~$256.95 as of 10/29/2025). Using the most recent quarter's diluted EPS of $2.05 and a simple annualized approach (x4 = ~$8.20), you get a rule-of-thumb P/E around ~31x.
Two caveats: (1) annualizing a single quarter is a blunt instrument when results are accelerating; (2) a more rigorous TTM or forward P/E would require a contiguous four-quarter EPS series and consensus estimates — those data points are not used here. Even allowing for some forward upside in earnings, a mid-20s to low-30s multiple implies the market is paying for sustained margin improvement and continued strong revenue growth tied to infrastructure activity.
In plain terms: the multiple already assumes progress. That doesn't mean MYR can't deliver it, but it raises the bar for future catalysts to keep the stock moving higher.
Catalysts to watch (near-term to 12 months)
- Federal and state infrastructure funding flows and awarded transmission/substation contracts - visible awards would be immediate revenue drivers.
- Quarterly earnings prints that sustain margin expansion and show improved backlog/visibility. (Latest quarter filed 10/29/2025.)
- Major renewables-transmission interconnection projects coming online or moving from engineering to construction phases.
- Investor-facing events: MYR participated in industry and energy transition conferences during 2025 (KeyBanc symposium 09/18/2025; other investor conferences in Nov/Dec 2025), which can sharpen sell-side models and raise visibility.
Trade idea (actionable)
Given improving fundamentals but elevated valuation, the recommended approach is tactical and size-conscious.
- Trade direction: Long (selective, tactical)
- Time horizon: Swing / medium-term (3-9 months)
- Entry: Primary preference: buy weakness / pullback to $230 - $240. Secondary: small starter position up to $262 if you already own and add on pullback.
- Initial target 1: $310 (roughly +20% from mid-entry of $258). Target 2: $360 (material re-rating continuation).
- Stop: 10% below entry (e.g., if entry $240, stop $216). Use size so a stop at -10% equals your plan-level risk tolerance.
- Position sizing: Keep initial exposure small (3-5% of portfolio) and add only on confirmation (sustained margin beats, visible award wins) or deeper pullback to $200 - $220.
Rationale: buying on a controlled pullback reduces the chance of paying for near-term optimism already in the price while keeping exposure to the secular transmission/T&D opportunity.
Risks and counterarguments
Below are principal risks and the flip-side views:
- Execution / project risk: Large transmission and substation jobs can suffer delays, cost overruns, or supply-chain bottlenecks. For a contractor, a single large underperforming job can dent margins. Counterargument: recent sequential operating leverage and cash flow suggest execution has improved, but project risk remains inherent.
- Margin pressure from inflation or labor scarcity: Higher materials or labor costs on fixed-price jobs compress margins. Counterargument: Q3 2025 shows margin recovery (gross margin ~11.8%), indicating some ability to pass through or manage costs — but sustaining this is the key.
- Cyclical demand / policy shifts: If federal/state funding priorities slow or permit timelines drag, the revenue pipeline could soften. Counterargument: multiple policy channels (resilience, renewables, electrification) diversify demand, but timing and scale are uncertain.
- Valuation risk: The stock trades at an elevated multiple (~31x simple annualized P/E). If growth or margins disappoint, multiple contraction could cause outsized downside. Counterargument: If MYR consistently converts higher revenue into operating leverage and cash flow, the multiple may be justified, but the bar is high.
- Balance-sheet / working capital swings: Contractors can see abrupt working-capital moves; current liabilities are sizable (~$800.9m). While long-term debt is modest (~$72m), cash conversion is what matters. Counterargument: recent operating cash flow (~$95.6m in Q3) is encouraging, implying better cash conversion recently.
What would change my mind?
I would turn more constructive (add to size or move to a buy-and-hold stance) if: (1) management reports a multi-quarter pattern of margin expansion with operating margin sustainably above ~6% and visible margin guidance improvements; (2) the company prints clear, outsized contract awards that materially increase backlog and multi-year revenue visibility; or (3) we see durable cash-flow improvements that support buybacks or lower net working capital.
I would become more negative if: (1) margins slip back to the mid-single digits or lower despite the tailwinds; (2) there are publicized large project write-offs or claims; or (3) the next two quarters show meaningful revenue deceleration indicating demand timing issues.
Bottom line: MYR Group is a high-quality, well-positioned contractor to the U.S. energy and grid buildout. The business is showing tangible operational improvement and healthy cash flow. The stock, however, has run materially and trades at a premium that reflects an optimistic execution and demand outlook. A tactical, pullback-focused long is the prudent trade: participate into weakness with clear stops and watch the next few quarterly prints for confirmation that higher margins are sustainable.
— Marcus Reed, Transport & Logistics Analyst, TradeIQAI
Company homepage: https://www.myrgroup.com