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ARGAN INC (AGX)·Q2 2026 Earnings Summary

Executive Summary

  • AGX delivered a strong Q2 FY2026: revenue $237.7M, gross margin 18.6%, and record diluted EPS $2.50; EBITDA rose to $36.2M. Backlog reached a record ~$2.0B, cash/investments were $572.2M, and net liquidity $344.5M with no debt .
  • Versus estimates, EPS was a significant beat (actual $2.50 vs consensus $1.64*), EBITDA beat ($36.2M vs $32.7M*), while revenue was a modest miss ($237.7M vs $244.0M*) as several newly awarded power projects were early-stage with limited revenue contribution .
  • Sequential momentum: revenue +23% vs Q1; margins remained elevated (18.6% vs Q1’s 19.0%), supported by strong execution in Power Industry Services; tax expense was unusually low ($0.4M) due to stock option deduction benefits .
  • Management reiterated disciplined bidding, capacity to handle 10–12 power jobs, and an expectation to push backlog “significantly over $2B” by year-end; dividend maintained at $0.375/share and buyback authorization stands at $150M .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and profitability: gross margin improved to 18.6% (vs 13.7% prior-year), with record EPS of $2.50 and EBITDA $36.2M; management highlighted “excellent execution” and project milestones including first fire on both Trumbull units (second in August) .
  • Backlog and pipeline strength: consolidated backlog reached ~$2.0B, supported by new awards (e.g., Platin Power Station in Ireland ~170 MW); management expects to exceed $2B backlog by year-end .
  • Balance sheet strength and capital returns: $572.2M cash/investments, $344.5M net liquidity, no debt; dividend of $0.375/share continued, and buyback authorization was increased to $150M in April .

Management quote: “We drove continued momentum…with record backlog of $2.0 billion” and “we’re excited about the opportunities we’re seeing in the marketplace…with the right partners, in the right geographies” .

What Went Wrong

  • Revenue came in slightly below consensus due to early-stage timing of several newly awarded projects (limited revenue recognition), despite mature projects carrying activity; revenue $237.7M vs $244.0M consensus* .
  • Segment mix headwind in Industrial Construction Services: revenue declined YoY to $36M (from $50M), though sequential revenue improved vs Q1; margin was lower than telecom and power segments .
  • Limited visibility on margins sustainability: management declined to guide gross margin levels given project “lumpiness”; near-term margins benefited from execution, favorable weather and job progress, but sustainability is inherently variable .

Analyst concern: Q&A probed whether 18.6% gross margin included one-time gains and sustainability; management reiterated conservative stance and no revenue/EPS guidance .

Financial Results

Quarterly Performance vs Prior Periods

MetricQ4 2025Q1 2026Q2 2026
Revenue ($USD Millions)$232.474 $193.660 $237.743
Gross Profit ($USD Millions)$47.613 $36.863 $44.267
Gross Margin %20.5% 19.0% 18.6%
Net Income ($USD Millions)$31.369 $22.550 $35.275
Diluted EPS ($USD)$2.22 $1.60 $2.50
EBITDA ($USD Millions)$39.259 $30.299 $36.225
SG&A ($USD Millions)$14.946 $12.521 $14.212
Other Income ($USD Millions)$5.965 $5.444 $5.581
Income Tax Expense ($USD Millions)$7.263 $7.236 $0.361

Notes:

  • Sequential revenue +22.7% vs Q1; YoY revenue +4.7% vs Q2 FY2025; YoY gross margin expansion +490 bps .

Actuals vs Wall Street Consensus (S&P Global)

MetricQ4 2025Q1 2026Q2 2026
Revenue Actual ($USD Millions)$232.474 $193.660 $237.743
Revenue Consensus Mean ($USD Millions)$197.5*$193.75*$243.967*
Diluted EPS Actual ($USD)$2.22 $1.60 $2.50
Primary EPS Consensus Mean ($USD)$1.145*$1.09*$1.64*
EBITDA Actual ($USD Millions)$39.259 $30.299 $36.225
EBITDA Consensus Mean ($USD Millions)$20.90*$20.80*$32.70*

Values marked with * retrieved from S&P Global.

Segment Breakdown (Q2 2026)

SegmentRevenue ($USD Millions)% of RevenueGross Margin % (Q2 2026)Revenue YoY ($USD Millions)Gross Margin % (Q2 2025)
Power Industry Services$197 83% 19.6% $174 13.5%
Industrial Construction Services$36 15% 12.5% $50 13.0%
Telecommunications Infrastructure ServicesN/A2% 24.7% N/A31.4%

KPIs and Balance Sheet

KPIJan 31, 2025Apr 30, 2025Jul 31, 2025
Project Backlog ($USD Millions)$1,361 $1,856 $1,953 (~$2,000)
Cash, Cash Equivalents & Investments ($USD Millions)$525.137 $546.457 $572.190
Net Liquidity ($USD Millions)$301.443 $315.127 $344.462
DebtNone None None
Cash Dividend per Share ($)$0.375 (Q4) $0.375 (Q1) $0.375 (Q2)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue/EPS GuidanceFY2026Company does not provide revenue/EPS guidance Reaffirmed policy of no guidance Maintained
Gross Margin OutlookFY2026Expect to exceed last fiscal year’s gross profit margin % of revenues (from prior call) “Continues to be our expectation,” margin guidance not quantified Maintained
Backlog OutlookFY2026 YERecord backlog $1.9B as of Q1; expect additions Record ~$2.0B as of Q2; expect “significantly over $2B” by YE Raised outlook qualitatively
DividendQuarterly$0.375/share (raised to $0.375 in Sept 2024) $0.375/share in Q2 Maintained
Share RepurchaseOngoingAuthorization increased to $150M (April) $150M remains in place Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2025 & Q1 2026)Current Period (Q2 2026)Trend
AI/data center-driven power demand“Electrification of everything” driving grid strain; robust pipeline; Sandow Lakes 1.2GW NTP Continued emphasis on reliable 24/7 energy for AI/data centers; OEM gas turbines “sold out,” PJM capacity auction at record levels Strengthening demand narrative
Backlog trajectoryBacklog $1.4B (Q4) → $1.9B (Q1) ~$2.0B (Q2) with expectation to exceed $2B by YE Upward
Project milestonesQ4: multiple projects advancing; Q1: Sandow Lakes NTP Trumbull first fire at both units; LNG project completed; renewables progressed Positive execution
Pricing/marginsQ4/Q1: margin recovery; cautious commentary No margin guidance; emphasizes execution and conservatism; expects to exceed last FY’s margin % Cautious stability
Capacity & headcountBuilding teams for multi-year cycle Capacity to handle 10–12 power jobs; added headcount past 18 months Expanded capacity
Capital returnsDividend increased to $0.375; buyback active Dividend maintained; buyback authorization $150M; $25M returned in 1H Ongoing
Regional mixU.S. and Ireland activity; biofuel and gas projects New EPC award for Platin Power Station (Ireland) ~170 MW; multiple U.S. gas projects Diversified momentum

Management Commentary

  • Strategy: Focus on “winning the right projects, with the right partners, in the right geographies,” leveraging energy-agnostic capabilities to meet rising demand for reliable power, including combined cycle gas facilities and renewables .
  • Backlog and pipeline: “Record backlog of $2 billion…expect over the rest of the current fiscal year to add a few more power jobs, which would put us significantly over $2 billion in backlog” .
  • Execution: “Completed our LNG project in Louisiana and achieved first fire at one of our Trumbull units, followed by first fire at the second Trumbull unit occurring in August” .
  • Financial posture: “$572 million of cash and investments, net liquidity of $344 million, and no debt…quarterly dividend of $0.375” .

Q&A Highlights

  • Trumbull timeline: After first fire on both units (second in August), project remains “on time and on budget,” expected completion in 1H next year .
  • Margins sustainability: Management does not guide margins; highlighted execution excellence across recent quarters and expects to exceed last fiscal year’s gross margin percent of revenues .
  • Pipeline/backlog additions: Expect to add “a few more power jobs” in the remainder of the year, pushing backlog well above $2B; variety of project sizes (170MW to 1.2GW) possible .
  • Market dynamics: OEM gas turbines “sold out,” PJM capacity auction at record pricing; supports elevated opportunity set .
  • Capacity: Company believes it has capacity for 10–12 power jobs; focus remains on organic growth and team expansion .

Estimates Context

  • EPS: Strong beat; Q2 actual $2.50 vs consensus $1.64*. Q1 beat $1.60 vs $1.09*; Q4 beat $2.22 vs $1.145*. Elevated margins and project execution were key drivers .
  • Revenue: Q2 slight miss $237.7M vs $244.0M*; Q1 in line/slight beat $193.7M vs $193.8M*; Q4 beat $232.5M vs $197.5M*; Q2 miss explained by early-stage timing on new awards with limited revenue in period .
  • EBITDA: Q2 beat $36.2M vs $32.7M*; Q1 beat $30.3M vs $20.8M*; Q4 beat $39.3M vs $20.9M*. Non-GAAP EBITDA was reconciled to GAAP in the company’s press release .

Values marked with * retrieved from S&P Global.

Where estimates may need to adjust: Upward bias to EPS and EBITDA in near-term quarters if margin execution in Power Industry Services persists; revenue trajectory likely to improve as early-stage awards ramp, aided by strong backlog conversion .

Key Takeaways for Investors

  • Quality beat: EPS and EBITDA materially exceeded consensus; revenue was a small miss due to project timing—narrative remains margin-led, with robust execution in Power Industry Services .
  • Backlog momentum: With ~$2.0B backlog and management expecting >$2B by YE, multi-year visibility is strengthening; newly awarded projects across U.S. and Ireland diversify mix .
  • Execution catalysts: Trumbull nearing completion (1H next year) and Sandow Lakes ramp supports revenue/earnings cadence into 2H/FY2027; first fire achievements de-risk project delivery .
  • Capital allocation: Strong balance sheet, ongoing dividend ($0.375/share) and buyback authorization ($150M) create downside support while funding growth .
  • Estimate revisions: Expect upward EPS/EBITDA estimate adjustments given margin performance; watch for revenue estimate normalization as early-stage projects convert to activity .
  • Risk checks: Margin sustainability is inherently lumpy; management does not guide; segment mix (industrial/telecom) can dampen consolidated margins if power segment pauses; project timing remains a swing factor .
  • Trading implications: Positive skew from EPS/EBITDA beats, record backlog and strong pipeline; monitor next awards, Trumbull completion milestones, and PJM/AI-related demand indicators for near-term catalysts .

Citations: Press release and 8-K exhibit (Q2 FY2026) ; Q1 FY2026 press release ; Q4 FY2025 press release ; Q2 FY2026 earnings call transcript ; July 28 Platin Power Station press release .