The record quarter nobody bought

MYR Group, a contractor founded in 1891 that strings high-voltage transmission line for utilities and wires data centers, airports and hospitals for developers, closed its June quarter with the best numbers it has ever reported. Revenue rose 20.1% to a record $1.08bn. Gross margin widened 170 basis points to 13.2%, net income nearly doubled, and backlog reached a record $3.16bn, a fifth higher than a year ago.

The composition is the story. Of that backlog, $1.89bn sits in the commercial and industrial division and $1.27bn in transmission and distribution. In the quarter itself, grid revenue grew 4% to $524m — nearly two-thirds of it routine work under master service agreements — while commercial and industrial revenue grew 42% to $558m, overtaking the grid division for the first time. The company most cleanly positioned as a play on interconnection is growing because of building wiring.

Booked, not burned

That is not a demand failure; it is a construction calendar. MYR Group's two Xcel Energy transmission awards, worth more than $200m combined, contribute no revenue until the second half of 2027 and then run for roughly eighteen months. Management told investors on its July call that most of the major projects it has won will be constructed between 2028 and 2030. A 500 kV Arizona substation and a 345 kV Texas rebuild sit in that queue.

The delay has a named cause. Under the Federal Energy Regulatory Commission's (FERC) Order 2023, utilities now study proposed grid connections in clusters rather than one at a time, with deadlines and penalties for late studies. Throughput is improving — PJM Interconnection has processed more than 170,000 MW of generation requests since 2023 — but against a national queue near 2,200 GW. Texas has paused new data-center interconnections in the face of an estimated 474 GW of requests, more than five times ERCOT's record peak. American Electric Power raised its five-year capital plan by $6bn to $77.9bn, including $33bn of transmission, and has threatened to leave PJM and SPP over how slowly connections clear. S&P Global puts US utility capital spending near $1.3 trillion for 2026-30. The money is committed. The billable hours are years out.

The de-rating is a multiple, not an estimate

MYR Group shares closed at $318.17 on 21 August, against $438.96 three months earlier. Consensus earnings for this year did not fall over that stretch; the multiple did, from 36x to 26x. Goldman Sachs analyst Neil Mehta made the mechanism explicit on 12 August, cutting his target to $422 from $469 by lowering the target enterprise-value-to-EBITDA multiple to 16.5x "to reflect broader AI and power market multiples." The stock trades at 16.4x trailing EV/EBITDA. Quanta Services, the tier-one electric-power contractor with a $100bn market value, trades at 35.1x — and grew revenue 41% last quarter, so the premium is not unearned, merely large.

The break was collective and fast. Between 17 and 21 August, Sterling Infrastructure fell 14.6%, Comfort Systems 10.9%, Quanta 8.8%, EMCOR 8.7%, Dycom 7.3% and MYR Group 6.4%; MYR Group's 50-day average crossed below its 200-day on 19 August, ending an uptrend that had held since spring. The proximate cause sits upstream: investors have been rotating away from AI infrastructure names whose capacity is increasingly debt-funded, and European Central Bank economists warned on 18 August that a valuation correction is likely.

The consultancies went the other way

AECOM, a fee-for-service design and program-management firm selling to transport agencies, water utilities and defense ministries, rose 4.0% in those same four sessions — after falling 19% in two days around its 11 August results. It took a $337m pre-tax charge on a single construction-management project awarded in 2019 on terms it says it would not accept today. Quarterly revenue fell 14.2% to $3.59bn and the company posted a $76m operating loss. Free cash flow guidance was cut to $300m from $400m, with roughly $500m of cash going out through the first half of 2027 against a $600-650m claims position management concedes needs years and litigation.

Underneath, orders are at a record: backlog up 13% to $27.8bn, with $1.60 booked for every dollar burned in the quarter. Its Department of War pipeline is up 30%, its US water pipeline the same, and president Lara Poloni called data centers among the fastest-growing parts of the business. The shares are down 46.7% over twelve months and sit at 10.4x the $6.22 consensus expects in fiscal 2027.

Tetra Tech, a water and environmental consultancy whose federal work was disrupted by 2025 agency cuts, is the recovery trade. Revenue grew 13.5% to $1.31bn, backlog reached a record $4.5bn and guidance was raised to $1.56-1.59 per share. But gross margin fell to 18.6% from 21.8%, operating income declined 4.3%, and its data-center practice runs at roughly $60m a year — about 1.4% of guided revenue. Whatever is re-rating Tetra Tech, from 17.3x forward earnings in May to 23.5x now, it is not megawatts.

The setup

Where it stands — MYR Group's grid backlog is at a record while grid revenue grows 4%; the earnings from it arrive in 2028-2030.

Would confirm — Transmission and distribution revenue growth accelerating above 10% year on year in the September or December quarter.

Would invalidate — Backlog falling below $3bn, or full-year organic growth guidance cut beneath the 13-15% management set in July.

Watch next — MYR Group's third-quarter results in late October, the first to include Valley Electric and Comet Electric.

Valuation — 29.7x trailing and 25.9x forward earnings, against 36x forward in May and Quanta's 42.9x forward today.