Q2 2024 Earnings Summary
- Strong demand in data centers, semiconductors, and industrial sectors is contributing significantly to Everus' backlog, reflecting robust growth opportunities. , ,
- Management is confident in their guidance ranges, citing record Q2 performance and record backlog, and expects future results to reflect the momentum of ongoing projects in data center, manufacturing, healthcare, solar, and institutional sectors.
- Successful pivot from completed projects to new opportunities, redeploying resources from areas like the Las Vegas hospitality market to data centers and other sectors, demonstrates the company's adaptability and resilience in navigating market changes. ,
- MDU has lowered its revenue guidance for Everus to $2.65 billion to $2.85 billion, down from previous guidance of $2.9 billion to $3.1 billion, due to lower revenues year-to-date, largely from timing of projects.
- Timing delays in revenue recognition, particularly in the Electrical and Mechanical segments, due to misalignment of new project starts with completion of large projects, especially in the commercial hospitality market in Las Vegas, could pose risks to revenue growth.
- Competitive market conditions are leading to comparable margins, which may limit margin expansion despite growth in backlog.
-
Everus Spin-Off Plans
Q: Will MDU retain any equity stake in the upcoming Everus spin-off?
A: MDU plans a late 2024 spin-off of Everus, targeting the fourth quarter. They aim to ensure Everus is well-capitalized and that MDU Resources remains strong without liabilities from the spin-off. While they retained a stake in the Knife River transaction, they have not yet decided whether to retain an equity stake in Everus. This decision will be detailed in the Form 10 to be released later this year. -
Backlog Mix and Margins
Q: How is the backlog mix affecting margins at Everus?
A: Everus's backlog is diversified, with significant contributions from data centers, semiconductors, and industrial work. Data center work is one of the most significant areas. Margins remain comparable in a competitive market, and they seek margin uplift through project execution and operational excellence initiatives. -
Timing Delays and Revenue Impact
Q: What is causing timing delays in revenues, and how does it impact segments?
A: Timing delays are primarily in the Electrical and Mechanical segments, where new project starts haven't perfectly aligned with large project completions in the commercial hospitality market in Las Vegas. Significant projects are in preconstruction, and as they gain momentum, results will reflect in future quarters. Confidence remains in their guidance ranges due to a record backlog and strong Q2 performance. -
Ohio Data Center Growth
Q: Are the PJM workshops affecting Ohio data center growth?
A: The upcoming PJM workshops related to the Amazon ISA are not impacting the pace of Ohio data center growth. They have substantial data center work and are exploring a semiconductor facility to capitalize on other regions. Growth in this area has been at a very fast rate. -
Market Shifts and Resource Deployment
Q: How is Everus navigating shifts in other construction sectors?
A: Everus effectively pivots between markets. After completing projects in the white-hot commercial hospitality market in Las Vegas, they've redeployed resources to other areas. They've notably picked up additional data center work with key performers from previous projects.
Research analysts covering MDU RESOURCES GROUP.