Argan doubles backlog as AI power demand fuels earnings beat
Construction firm reports 65% EPS surprise, raises dividend 33% on data center expansion
Argan Inc. surged in after-hours trading Thursday after the construction and engineering company reported fourth-quarter earnings that crushed analyst expectations, fueled by what management described as exceptional demand from artificial intelligence data center power infrastructure projects.
The Arlington, Virginia-based company reported fourth-quarter earnings per share of $3.47, beating the consensus estimate of $2.10 by 65.5%. Revenue reached $262.1 million, a 12.7% increase from the prior year despite falling slightly short of analyst projections.
The standout metric in the report was Argan's project backlog, which doubled to $2.93 billion from $1.36 billion a year earlier, providing multi-year revenue visibility for a company whose market capitalization stands at approximately $6.1 billion.
"We are experiencing exceptional demand for our power infrastructure services, particularly as data center operators rush to build capacity for AI workloads," the company stated in its earnings release. The backlog expansion underscores how the artificial intelligence boom is creating ripple effects across traditional construction and engineering sectors.
Argan's profitability metrics showed substantial improvement. Gross margin expanded by 450 basis points to 25%, while EBITDA jumped 42.5% year-over-year to $56 million. For the full fiscal year, earnings per share reached $9.74, a 58% increase from the previous year.
The company's balance sheet strengthened significantly, with cash position growing 70% to $895 million and no debt on the books. Capitalizing on its financial strength, Argan's board approved a 33% dividend increase to $0.50 per share.
Argan, which provides engineering, procurement, and construction services to the power generation market, has positioned itself as a key player in the energy transition. The company builds alternative energy facilities including biomass plants, wind farms, battery storage systems, and solar fields, alongside traditional power infrastructure.
The dramatic backlog increase suggests that data center operators are increasingly turning to specialized construction firms as they race to build power infrastructure capable of supporting energy-intensive AI computing. Major technology companies have announced billions of dollars in data center expansion plans, creating sustained demand for electrical and mechanical construction services.
Analysts had been watching Argan's earnings closely given the mixed signals in the construction sector. GuruFocus noted that expectations varied ahead of the report, with some analysts cautious about valuation concerns while others pointed to the company's strong positioning in growing end markets.
Shares of Argan have been volatile, trading between $111.16 and $492.70 over the past 52 weeks. The stock closed Thursday at $412, giving the company a price-to-earnings ratio of 51.5 times trailing earnings, reflecting investor optimism about growth prospects despite the premium valuation.
Institutional investors own 93% of Argan's shares, suggesting that the earnings beat may lead to further analyst coverage and potential price target revisions from major investment banks in the coming days.
Looking ahead, the company's doubled backlog provides clear visibility into future revenue streams, though execution risk remains given the complexity of large-scale power infrastructure projects. The margin expansion demonstrated in the fourth quarter suggests Argan is successfully leveraging its specialized expertise to command pricing in a competitive market.