Can Argan's 53% Power Revenue Growth Continue With a $2.5B Backlog?

Argan, Inc. AGX is positioned to benefit from rising demand for power infrastructure as electrification, data center development and domestic manufacturing increase the need for reliable energy capacity. The company’s Power segment remains central to this opportunity, supported by a strong project pipeline and capabilities in complex power plant construction. The focus on natural gas projects also gives the business exposure to growing demand for dependable, around-the-clock power generation.

Power revenues increased 53% year over year to $301 million in the second quarter of fiscal 2027, representing 78% of consolidated revenues. The segment generated a 22.4% gross margin, while strong project execution and project mix helped drive the improvement in consolidated gross profit.

The $2.5 billion consolidated backlog provides a substantial base for future revenues, despite declining from $2.9 billion at the start of fiscal 2027. More than 4.1 gigawatts of the Power backlog is tied to four U.S. gas-fired plants, while natural gas projects make up approximately 80% of the overall backlog. Several large projects are already progressing, including a 1.2-gigawatt Texas plant and additional 1.4-gigawatt and 860-megawatt projects.

However, revenue growth may not follow a straight path. Project timing can cause quarterly fluctuations, while some activity was pulled forward into the second quarter. Argan expects to add a handful of projects over the next seven to 15 months, supporting the longer-term growth opportunity. That said, the combination of active large-scale projects, a gas-heavy backlog and strong power demand supports further Power segment growth, although the pace is likely to vary with project execution and timing.

Argan and Its Key Infrastructure Competitors

Argan competes with MasTec, Inc. MTZ and Quanta Services PWR in power infrastructure and related construction markets. The company has a strong presence in power generation, particularly complex thermal and gas-fired projects. Argan also operates in industrial fabrication and Teledata services.

MasTec reported a record backlog of $21.4 billion in the second quarter, up 30% year over year and 5% sequentially. The company recorded a book-to-bill ratio of 1.2x, led by Pipeline Infrastructure and Clean Energy & Infrastructure. Power Delivery, Pipeline Infrastructure and Clean Energy & Infrastructure benefited from demand for grid modernization, power generation, renewables, natural gas and data centers. Clean Energy & Infrastructure revenues increased 43%, while segment backlog rose $500 million sequentially with a 1.3x book-to-bill ratio.

Quanta reported a record backlog of approximately $53.4 billion in the second quarter, up about 49% year over year from $35.8 billion. The backlog reflects demand across utility, generation and technology load center markets. Larger programs and multiyear commitments are also emerging across these markets, which could support revenues over an extended period. Recent acquisitions have added capabilities in electrical, mechanical, civil and fabrication services, further expanding the company’s addressable market.

Both MasTec and Quanta offer strong revenue visibility through sizable order books. MasTec benefits from diversified infrastructure demand across power, renewables and data centers, while Quanta’s backlog is supported by utility, generation and technology load center projects. Argan’s $2.5 billion backlog is more concentrated in power, with natural gas projects accounting for approximately 80% of the total backlog.

AGX Stock’s Price Performance & Valuation Trend

Shares of AGX have gained 31% year to date, outperforming the Zacks Building Products - Miscellaneous industry, the broader Zacks Construction sector and the S&P 500 Index.

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The stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 27.39, as the trend lines suggest below.

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Earnings Estimate Trend Favors AGX

AGX’s earnings estimates for fiscal 2027 and 2028 have remained unchanged over the past 30 days at $12.60 and $16.66 per share, respectively. The estimates for fiscal 2027 and 2028 imply year-over-year growth of 29.4% and 32.2%, respectively.

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Argan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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