MYR Group Inc. (MYRG) Bundle
Understanding MYR Group Inc. (MYRG) Revenue Streams
Understanding MYR Group Inc.’s Revenue Streams
MYR Group Inc. generates revenue primarily from two segments: Transmission & Distribution (T&D) and Commercial & Industrial (C&I). The financial performance of these segments provides insight into the company’s overall revenue health.
Breakdown of Primary Revenue Sources
| Segment | Contract Revenues (2024 Q3) | Contract Revenues (2023 Q3) | Percentage Change |
|---|---|---|---|
| Transmission & Distribution | $481,876,000 | $548,595,000 | -12.2% |
| Commercial & Industrial | $406,167,000 | $390,881,000 | +3.9% |
| Total | $888,043,000 | $939,476,000 | -5.5% |
For the nine months ended September 30, 2024, the breakdown was as follows:
| Segment | Contract Revenues (2024) | Contract Revenues (2023) | Percentage Change |
|---|---|---|---|
| Transmission & Distribution | $1,430,480,000 | $1,497,655,000 | -4.5% |
| Commercial & Industrial | $1,102,015,000 | $1,142,053,000 | -3.5% |
| Total | $2,532,495,000 | $2,639,708,000 | -4.1% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects a decline in total revenues. For the three months ended September 30, 2024, total revenues decreased by $51.5 million, or 5.5%, compared to the same period in 2023. For the nine months ended September 30, 2024, total revenues decreased by $107.2 million, or 4.1%, compared to the previous year.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contribution of each segment to total revenue was:
- Transmission & Distribution: 56.5% ($1,430,480,000)
- Commercial & Industrial: 43.5% ($1,102,015,000)
Analysis of Significant Changes in Revenue Streams
The T&D segment experienced a significant decrease in revenue primarily due to:
- A decrease of $105.0 million in revenue on transmission projects.
- While there was an increase of $37.8 million in revenue on distribution projects.
In contrast, the C&I segment saw an increase in revenue by $15.3 million for the three months ended September 30, 2024, attributed to:
- An increase of $11.6 million in revenue on fixed-priced contracts.
- An increase of $6.8 million on T&E contracts.
However, there was a decrease of $3.1 million in revenues from unit price work.
Overall, the financial performance indicates challenges in the T&D segment, while the C&I segment shows resilience with slight growth amidst a broader revenue decline.
A Deep Dive into MYR Group Inc. (MYRG) Profitability
Profitability Metrics
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, gross profit was $77.3 million, compared to $92.4 million for the same period in 2023, reflecting a decrease of 16.3%. The gross margin for this period was 8.7%, down from 9.8% in 2023. For the nine months ended September 30, 2024, gross profit totaled $204.4 million, compared to $266.9 million in 2023, marking a decrease of 23.4%, with a gross margin of 8.1% compared to 10.1% in the prior year.
Operating income for the three months ended September 30, 2024, was $20.4 million, with an operating margin of 2.3%, down from 3.4% in 2023. For the nine-month period, operating income was $23.9 million, representing an operating margin of 1.0%, compared to 3.5% in 2023.
Net income for Q3 2024 was $10.6 million, down from $21.5 million in Q3 2023, while for the nine months ended September 30, 2024, net income was $14.3 million, compared to $66.9 million for the same period in 2023.
Trends in Profitability Over Time
The profitability metrics have exhibited a declining trend over the past year. Gross profit margins have decreased significantly, impacted by lower revenues and increased costs associated with project inefficiencies. The operating and net income margins have also contracted, reflecting challenges in maintaining profitability amid rising operational costs.
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, which typically feature gross margins around 15%-20% for similar firms, the current gross margin of 8.7% indicates a need for improvement. The operating margin of 2.3% is also below the industry average, which hovers around 5%-10%.
Analysis of Operational Efficiency
Operational efficiency has been challenged in recent periods. Selling, general, and administrative expenses (SG&A) for the three months ended September 30, 2024, were $57.5 million, a slight decrease from $59.9 million in 2023. For the nine months, SG&A increased to $181.5 million from $174.6 million in the prior year. This increase is primarily attributed to higher employee-related expenses and contingent compensation related to acquisitions.
| Metric | Q3 2024 | Q3 2023 | Change (%) | 9M 2024 | 9M 2023 | Change (%) |
|---|---|---|---|---|---|---|
| Gross Profit | $77.3 million | $92.4 million | -16.3% | $204.4 million | $266.9 million | -23.4% |
| Gross Margin | 8.7% | 9.8% | -11.2% | 8.1% | 10.1% | -19.8% |
| Operating Income | $20.4 million | $32.0 million | -36.3% | $23.9 million | $91.9 million | -73.9% |
| Operating Margin | 2.3% | 3.4% | -32.4% | 1.0% | 3.5% | -71.4% |
| Net Income | $10.6 million | $21.5 million | -50.7% | $14.3 million | $66.9 million | -78.6% |
Debt vs. Equity: How MYR Group Inc. (MYRG) Finances Its Growth
Debt vs. Equity: How MYR Group Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, MYR Group Inc. reported total outstanding debt of approximately $16.0 million, consisting of both short-term and long-term equipment notes. The breakdown includes $4.4 million in short-term debt and $11.6 million in long-term debt .
Furthermore, the company has operating lease obligations totaling $40.6 million as of the same date, which includes $11.1 million in short-term and $29.5 million in long-term obligations .
Debt-to-Equity Ratio
MYR Group Inc. maintains a debt-to-equity ratio of approximately 0.30 as of September 30, 2024, indicating a conservative approach to leverage compared to the industry average, which is around 1.0. This ratio suggests that the company utilizes less debt relative to equity compared to its peers.
Recent Debt Issuances and Credit Ratings
The company's credit ratings remain stable, reflecting its financial health and ability to manage debt effectively. Recent interest expenses for the third quarter of 2024 amounted to $2.0 million, an increase from $1.3 million in the same period the previous year .
Debt Management Strategy
MYR Group Inc. balances its financing through a combination of debt and equity. The company actively engages in refinancing activities to optimize its capital structure, enabling it to maintain flexibility for growth initiatives. In the nine months ended September 30, 2024, the company reported net borrowings of $64.0 million under its revolving line of credit .
Table: Debt and Equity Overview
| Type | Amount (in millions) | Notes |
|---|---|---|
| Short-Term Debt | $4.4 | Equipment notes |
| Long-Term Debt | $11.6 | Equipment notes |
| Operating Lease Obligations | $40.6 | Includes short-term and long-term |
| Debt-to-Equity Ratio | 0.30 | Conservative leverage compared to industry |
| Interest Expense (Q3 2024) | $2.0 | Increased from previous year |
| Net Borrowings (9 months ended Sep 30, 2024) | $64.0 | Under revolving line of credit |
Assessing MYR Group Inc. (MYRG) Liquidity
Assessing MYR Group Inc.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for MYR Group Inc. is 1.57, indicating that the company has $1.57 in current assets for every $1.00 of current liabilities. The quick ratio, which excludes inventory from current assets, stands at 1.20.
Analysis of Working Capital Trends
The working capital for MYR Group Inc. as of September 30, 2024, is $269.2 million, demonstrating a healthy liquidity position. This figure represents an increase from $234.6 million reported at the end of 2023. The increase is primarily due to improved cash flow management and effective handling of receivables and payables.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, reveals the following:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $66,000 | $28,392 |
| Net Cash Used in Investing Activities | $(56,800) | $(39,200) |
| Net Cash Used in Financing Activities | $(26,000) | $(15,000) |
Potential Liquidity Concerns or Strengths
Despite the overall positive liquidity position, there are some concerns regarding cash flow volatility influenced by project delays and increased costs. The company reported a decrease in net income to $14.3 million for the nine months ended September 30, 2024, down from $66.9 million in the same period of 2023. Additionally, the interest expense rose to $4.3 million in 2024 from $3.1 million in 2023, reflecting higher average debt levels. However, the availability of $375.5 million under the revolving credit facility as of September 30, 2024, provides a substantial buffer against short-term liquidity needs.
Is MYR Group Inc. (MYRG) Overvalued or Undervalued?
Valuation Analysis
Identifying whether the company is overvalued or undervalued involves analyzing key financial ratios and stock performance metrics.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated based on the latest earnings per share (EPS). For the nine months ended September 30, 2024, the diluted EPS was $0.86. Assuming the current stock price is approximately $116.54, the P/E ratio is:
P/E Ratio = Stock Price / EPS = $116.54 / $0.86 ≈ 135.3
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, was calculated as follows:
- Total Shareholders' Equity: $588.5 million
- Common Shares Outstanding: 16.122 million
- Book Value per Share = Total Shareholders' Equity / Common Shares Outstanding = $588,509,000 / 16,122,000 ≈ $36.5
Thus, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $116.54 / $36.5 ≈ 3.19
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio, we first need the enterprise value (EV) and EBITDA. The EBITDA for the nine months ended September 30, 2024, was $72.3 million. The enterprise value is calculated as:
- Market Capitalization: $1.88 billion (assumed stock price multiplied by shares outstanding)
- Total Debt: $16 million
- Cash and Cash Equivalents: $40 million (assumed)
- Enterprise Value = Market Capitalization + Total Debt - Cash = $1.88 billion + $16 million - $40 million ≈ $1.856 billion
Thus, the EV/EBITDA ratio is:
EV/EBITDA Ratio = EV / EBITDA = $1.856 billion / $72.3 million ≈ 25.7
Stock Price Trends
Over the last 12 months, the stock price has exhibited volatility. The price started at approximately $120, reached a peak of $130 in mid-2023, and has since adjusted to around $116.54.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, thus the dividend yield is 0%.
Analyst Consensus on Stock Valuation
Analyst recommendations vary, with a consensus rating of Hold according to recent reports.
| Metric | Value |
|---|---|
| P/E Ratio | 135.3 |
| P/B Ratio | 3.19 |
| EV/EBITDA Ratio | 25.7 |
| Stock Price | $116.54 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing MYR Group Inc. (MYRG)
Key Risks Facing MYR Group Inc.
The financial health of MYR Group Inc. is influenced by several internal and external risk factors that could impact its operational performance and profitability.
Industry Competition
The company operates in a highly competitive market where numerous firms vie for similar contracts. This competition can lead to pricing pressures and reduced margins. For instance, the Transmission & Distribution (T&D) segment reported revenues of $481.9 million for the three months ended September 30, 2024, down from $548.6 million in the same period in 2023, reflecting a decrease of 12.2%.
Regulatory Changes
Changes in regulations can significantly affect project timelines and costs. The company has faced delays and cost volatility due to regulatory slowdowns, which could hinder new project awards and increase operational costs. In the nine months ended September 30, 2024, the effective tax rate rose to 42.5% from 30.3% in the previous year, primarily due to higher permanent difference items.
Market Conditions
Economic fluctuations can impact demand for construction services. The company reported a decrease in revenues of $107.2 million or 4.1% to $2.53 billion for the nine months ended September 30, 2024, compared to $2.64 billion in the same period in 2023.
Operational Risks
Operational risks include project delays and cost overruns. The T&D segment suffered a decrease in operating income to $39.1 million for the nine months ended September 30, 2024, down from $106.8 million in 2023, a decline of 63.4%. The company also reported significant gross profit changes negatively impacting operating income margins due to labor inefficiencies and project delays.
Financial Risks
Financial risks include rising interest expenses, which increased to $2.0 million for the three months ended September 30, 2024, from $1.3 million in the prior year. Additionally, net income for the same period fell to $10.6 million compared to $21.5 million in 2023.
Strategic Risks
The company faces strategic risks related to its project portfolio. As of September 30, 2024, the backlog was $2.60 billion, slightly down from $2.62 billion a year earlier. The variability in project timing and execution can lead to fluctuations in revenue recognition and profitability.
Mitigation Strategies
To mitigate these risks, the company continues to focus on maintaining a skilled workforce and leveraging its reputation for timely project completion. It also aims to enhance its bidding strategies to secure more profitable contracts, while actively managing operational efficiencies to minimize cost overruns.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition leading to pricing pressures | Revenue decrease from $548.6 million to $481.9 million |
| Regulatory Changes | Changes affecting project costs and timelines | Effective tax rate increased to 42.5% |
| Market Conditions | Economic fluctuations impacting demand | Revenue decreased by $107.2 million |
| Operational Risks | Project delays and cost overruns | Operating income fell to $39.1 million |
| Financial Risks | Rising interest expenses | Interest expenses increased to $2.0 million |
| Strategic Risks | Variability in project portfolio | Backlog at $2.60 billion |
Future Growth Prospects for MYR Group Inc. (MYRG)
Growth Opportunities
Future growth prospects for MYR Group Inc. (MYRG) are driven by several key factors, including product innovations, market expansions, and strategic partnerships.
Key Growth Drivers
- Market Expansion: The company continues to see strong bidding activity in electric distribution markets, particularly due to increased storm activity and the need to reinforce utility distribution systems against catastrophic damage.
- Legislative Support: Legislative actions aimed at enhancing infrastructure in the United States are expected to boost long-term demand, particularly for electric power infrastructure and clean energy spending.
- Acquisitions: The company has undertaken acquisitions that allow for enhanced capabilities and service offerings, positioning it to capture greater market share.
Revenue Growth Projections
For the nine months ended September 30, 2024, the consolidated revenues were $2.53 billion, a decrease of 4.1% from $2.64 billion in the same period of 2023. This decrease was primarily due to a $105.0 million reduction in revenue from transmission projects and a $40.1 million decline in the Commercial & Industrial (C&I) segment.
Revenues for the Transmission & Distribution (T&D) segment were $1.43 billion for the nine months ended September 30, 2024, down from $1.50 billion in the prior year.
Strategic Initiatives
- Clean Energy Projects: The company is focusing on clean energy projects, which are anticipated to yield significant future revenues despite current challenges, including contractual disputes and project inefficiencies.
- Partnerships: Collaborations with other firms in the clean energy sector are expected to enhance project capabilities and execution efficiency.
The following table summarizes the contract revenues by segment for the three months ended September 30, 2024 and 2023:
| Segment | 2024 Revenue ($ thousands) | 2023 Revenue ($ thousands) | Change ($ thousands) |
|---|---|---|---|
| Transmission & Distribution | $481,876 | $548,595 | -$66,719 |
| Commercial & Industrial | $406,167 | $390,881 | +$15,286 |
| Total | $888,043 | $939,476 | -$51,433 |
Competitive Advantages
MYR Group Inc. maintains several competitive advantages, including:
- Skilled Workforce: A highly skilled workforce that enhances project execution and customer satisfaction.
- Proven Safety Record: A reputation for safety and quality work that appeals to clients and helps secure contracts.
- Financial Stability: Better capitalization than some competitors, providing flexibility to undertake complex projects.
As of September 30, 2024, the company reported remaining performance obligations totaling $2.36 billion, indicating a robust pipeline of future work.
Overall, while challenges exist, the strategic focus on clean energy and infrastructure improvements positions MYR Group Inc. favorably for future growth.
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Article updated on 8 Nov 2024
Resources:
- MYR Group Inc. (MYRG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of MYR Group Inc. (MYRG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View MYR Group Inc. (MYRG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.