MYR Group (MYRG) Q2 2026 Earnings Call Transcript

MYR Group reported Q2’26 revenue of $1.08B (+20% YoY) and net income of $50M (+86% YoY; $3.17/diluted share), alongside higher EBITDA of $85M (record). Operating margins expanded (gross margin to 13.2% from 11.5%; T&D op margin to 9.4% from 8.0%; C&I op margin to 8.5% from 5.6%) and backlog hit a record $3.16B (+20% YoY). The company closed its $328M Valley Electric/Comet Electric acquisition on July 1 (funded by $93M cash and $235M revolver) and guided organic revenue growth of 13%-15%, with full-year operating margin guidance of 8%-11% for T&D and 6%-9% for C&I, though free cash flow was negative (-$26M) due to timing of taxes/billings and higher capex.

Analysis

MYRG is becoming a cleaner play on utility capex acceleration than the market usually gives it credit for, but the path is uneven. Near term, the earnings quality is better than the cash flow quality: margin upside was helped by closeouts and scope drift, while working capital is likely to re-normalize as DSOs move higher, which can mute FCF even if EBITDA keeps rising. That makes the stock more of a 1-3 month momentum/estimate-revision trade than a straight valuation rerate on current cash generation.

The second-order winner is not just MYRG but the broader electrical subcontractor stack with scale and procurement depth: PWR, MTZ and to a lesser extent PRIM should all see pricing discipline improve as utility and data-center demand stays tight against labor/material bottlenecks. The loser is the utility customer base, especially XEL-type spenders, where rising transmission intensity increases capex intensity before regulators fully catch up. That creates a multi-year tension: contractors gain volume and mix, while utilities absorb a longer regulatory lag and higher project execution risk.

Contrarian angle: consensus may be overemphasizing the headline backlog and underweighting the timing. A meaningful part of the large-project story does not convert until late 2027/2028, so the market could be pulling forward cash flows that are still 6-18 months away. Also, the acquisition is likely to look better in revenue terms than in incremental EPS in year one, so the stock can stall if investors realize the near-term optics outpace economic contribution.

Key Decisions for Investors

• Initiate a tactical long in MYRG on any post-print consolidation; target a 1-3 month move as backlog and margin upgrades flow into estimates, but use a stop if the stock gives back the post-earnings breakout or if next quarter shows DSO deterioration without offsetting EBITDA growth.
• Pair trade: long MYRG / short XEL for 3-6 months to isolate contractor upside versus utility capex burden; thesis breaks if XEL secures favorable regulatory recovery that neutralizes its capex pressure or if MYRG cash conversion weakens materially.
• Relative value long MYRG vs. PWR only on valuation pullbacks, not strength, because the setup is better for MYRG’s near-term revision upside while PWR already has broader investor ownership; trim if MYRG’s forward margins fail to hold mid-guidance by the next quarter.
• Buy a small starter position in MYRG only if the market sells the stock on lower operating cash flow; that would likely be a better entry than chasing the headline beat because the first-order EBITDA signal is already visible and the cleaner catalyst is 1-2 quarters away.