MYR Group: A Record Quarter the Market Refuses to Pay For

The disconnect

MYR Group just posted the best quarter in its history, and the market has spent the last three months selling the stock. Shares are down 39.8% over 90 trading days and 43.5% from the June 29 peak of $501.13. That is a violent de-rating for a $4.4 billion electrical contractor whose revenue, margins, earnings and backlog all set records in Q3. The tape explains part of it: the AI data center complex has been unwinding, with the basket down 5.3% over 90 days and 49 decliners against 7 advancers. MYRG is not a data-center landlord, but it is an electrical contractor with C&I exposure, so it got treated like one.

Management’s pushback is that the story is broader. Rick Swartz told analysts “it's not just data centers, it's the diversification” — Rick Swartz, President and Chief Executive Officer · 2026-10-29 that Don Egan laid out in prepared remarks. The C&I side now includes data centers, transportation, healthcare, education, municipal and wastewater work. That is true, and it is not new—prior calls have made the same point. But the market is not paying for “diversified electrical contractor” right now; it is de-rating the whole electrification complex.

What actually changed: the P&L

Operationally, Q3 was a clear acceleration. Revenue was a record $1.26 billion, up 32% year over year. C&I revenue hit $704 million, up 58%, and T&D revenue was $555 million, up 10%. Gross margin expanded to 13.6% from 11.8%, net income reached a record $60 million, EPS jumped 86% to $3.82, and EBITDA was a record $110 million. Total backlog was $3.68 billion, 38% higher than a year ago. The Q3 revenue figure extends a trajectory that already showed $1.1 billion in Q2, up 20% year over year. Valley and Comet added scale; fixed-price work and favorable job closeouts added margin.

The quality of the beat is the debate. Rick’s explanation was blunt: “it is good performance across the business units. That is the strong closeouts.” — Rick Swartz, President and Chief Executive Officer · 2026-10-29 Kelly Huntington added that amortization from Valley and Comet was less of a headwind than expected. Analysts pressed. The answer: C&I margins should operate at the high end of the 6%-9% profile, not above it. That is a good outcome, but it implies the 8.7% C&I operating margin in Q3 is closer to a ceiling than a new baseline. amortization expense and Change orders are part of why the quarter looked as good as it did.

There is a subtle guidance shift, too. In July, Rick said, “We'd love to see an uptick from there. But right now, when we look at the market and the jobs that are closing out, we see it kind of in that midrange for the rest of the year.” — Richard Swartz, President and Chief Executive Officer · 2026-07-30 Now he is guiding to the high end. That is an improvement, but it is an improvement within the same range—not a new margin regime. Gross margin was 13.6% in Q3 versus 11.8% a year earlier and 13.2% in Q2. Guidance still calls for C&I revenue growth of 18%-22%, T&D growth of 10%-13%, and total company growth of 15%-18% next year. That is not a company losing momentum. It is a company whose momentum is increasingly understood.

The timing problem

The bigger issue is duration. The large transmission projects that made MYRG a momentum stock are still not here. Rick was explicit: “that primary build-out will probably start in the 2028 timeframe.” — Rick Swartz, President and Chief Executive Officer · 2026-10-29 Some larger projects start in mid-to-late 2027, but the real step-up is 2028 and beyond. Next year’s T&D growth is mostly MSA and small/medium project work. This is not a new message: in July, Rick said “we really don't see that work starting until the second half of '27 and beyond.” — Richard Swartz, President and Chief Executive Officer · 2026-07-30 In April, he said large projects would come into backlog “in the future quarters.” The goalposts have not moved much, but the stock had.

That is why the record backlog is not enough. Backlog is lumpy, and Rick explicitly told analysts to listen more to what the company says about market activity than to the backlog line itself. Large projects remain the swing factor. Power Insights still forecasts transmission growth of about 10% a year through 2030, driven by load growth, aging infrastructure and resilience. Grid modernization is real. But real demand and near-term revenue are different things.

Cash, buyback, and the show-me

The cash flow is the least flattering part of the quarter. Operating cash flow fell to $46 million from $96 million; free cash flow was $9 million from $65 million. Kelly was direct:

We do see some continued headwinds, especially with interest rates being higher for longer. We are seeing payment terms being part of our conversations with customers and contract negotiations more than we were a few years ago.

The balance sheet is still a strength: $216 million funded debt, 0.63x leverage, $650 million availability, and an expanded facility with a aggregate capacity increase of $400 million. The new $100 million buyback is the tell. After a 40% drawdown, management is signaling that it sees value in its own stock, not just tuck-in M&A. Kelly said “we feel like we have got room to make repurchases where it makes sense.” — Kelly Huntington, Senior Vice President and Chief Financial Officer · 2026-10-29 The stock has been repurchased opportunistically before; this authorization is larger and comes at a very different price.

Valuation is still not cheap. At the last fundamentals mark, MYR traded at 47.1x trailing net income, down 41% from its 2024 peak but still a premium multiple. After the drawdown, the market is no longer paying for perfection. It is paying for proof.

Bottom line

MYR’s quarter says the electrical infrastructure cycle is intact. The stock says the market is done paying for 2028 today. The next catalysts are concrete: large project bookings by year-end 2026 or early 2027, and better free cash flow conversion as Valley and Comet season into the model. If those land, the 40% drawdown will look like a gift. If the large-project timing slips again—or if closeout-driven margins prove to be the high-water mark—the de-rating has further to go. This is a show-me story now, not a momentum story.