A utility contractor facing new margin pressures
- Centuri works for regulated utilities, mostly through master service agreements that give it recurring work.
- Q2 2026 revenue grew 32.9% to $961.9M, helped by strong gas work and new bids.
- Gross margins dropped to 7.2% in Q2 2026 due to higher fuel costs and a legacy contract reversal.
- The new Vision One Centuri plan targets 10-15% annual base revenue growth and 30-45% adjusted EPS growth through 2029.
- The hard part is execution: more bid work can lift margins, but it can also make results choppier.
Big targets, real execution risk
Centuri is trying to turn a steady utility services business into a faster earnings grower. Its Vision One Centuri plan targets 10-15% annual base revenue growth through 2029. It also targets 30-45% adjusted EPS growth, meaning management expects profit per share to grow much faster than sales.
The bull case is simple. Utilities need to spend on old gas pipes, a stronger power grid, data centers, and electric transmission. The top-line growth is clearly there, with Q2 2026 consolidated revenue jumping 32.9%. Management also expects significant data center project work to materialize soon.
The bear case is that the plan asks for a lot of flawless execution, and recent results show cracks. In Q2 2026, gross margin contracted 220 basis points to 7.2%. High fuel costs and workforce scale-up expenses ate into profitability. A $9.0M revenue reversal on a legacy City of Chicago contract also hurt results. Centuri wants bid work to rise from 22% of revenue in 2025 to about 35% by 2029, which adds even more project risk.
Finn's view is cautious. Growth looks solid, but performance, valuation, and financial health still leave questions. The biggest open question is whether management can pass through higher fuel costs to customers quickly enough to protect margins in the second half of the year.
Paid to keep utilities running
Centuri makes money by sending crews and equipment to build, repair, replace, and maintain utility networks. Its main customers are regulated gas and electric utilities. These customers spend money to keep service safe and reliable, so Centuri is tied to utility capital budgets.
A large part of the business comes from master service agreements, or MSAs. These are long-term contracts that give Centuri repeat work and better revenue visibility. At the end of Q1 2026, about 85% of the $6.5B backlog was related to MSAs.
The rest is bid work, where Centuri competes for specific projects. Management wants more of this work because it can be higher margin. That shift is central to the 2029 plan, but it also raises the chance of cost overruns, delays, and uneven quarterly results.
Storm restoration is another profit swing factor. When bad weather damages power lines, Centuri can earn higher-margin emergency work. But storms are hard to predict, so a good storm year can make margins look better than the base business really is.
What Centuri sells
Gas utility services
Crews maintain, retrofit, and install natural gas distribution networks. This is a core utility need, but it can be seasonal because winter weather can slow work.
Electric distribution services
Centuri repairs and upgrades local electric networks for utility customers. This work benefits from grid hardening and higher electricity demand.
Electric transmission projects
Management sees transmission as a key growth area. Centuri says it currently gets less than 10% of annual revenue from electric transmission while utilities are expected to spend about $150B on this category over four years.
Data center infrastructure
Centuri bids on power delivery, mechanical systems like chillers and HVAC, and gas, sewer, and water lines for data centers. Management expects to secure around $300M in data center work.
Storm restoration
After severe weather, Centuri helps restore damaged utility service. This work can be higher margin, but the timing and size are not predictable.
Canadian utility services
The Canadian Operations segment now includes gas and electric utility work after the Connect acquisition. Connect added $22.3M of Q2 2026 revenue to the segment.
Q2 revenue mix
Segment mix is based on Q2 2026 revenue of $961.9M. Customer concentration matters: the top 20 customers represented 65% of fiscal 2025 revenue.
What could break the plan
Inflation and fuel costs
High impact · High oddsRising costs for fuel and scaling the workforce are eating into profitability. In Q2 2026, fuel prices had a negative impact of 140 basis points on the Non-Union Electric segment alone. The company must prove it can pass these costs to customers.
Legacy contract surprises
Medium impact · Medium oddsIn Q2 2026, Centuri had to reverse $9.0M in revenue related to a legacy contract with the City of Chicago. These variable consideration risks can suddenly hurt quarterly profit, even when overall demand is strong.
Bid work grows too fast
High impact · Medium oddsCenturi wants bid work to rise from 22% of revenue in 2025 to about 35% by 2029. That can help margins, but bid jobs carry more risk than repeat MSA work. A few poor bids can hurt profit even if revenue rises.
EPS target depends on margin math
High impact · Medium oddsThe 2029 plan targets 30-45% adjusted EPS growth, far above the 10-15% annual base revenue growth target. That gap requires flawless margin expansion, which looks difficult given current inflationary pressures.
Customers and owners create stock risk
Medium impact · Medium oddsCenturi depends on major utility customers. The top 20 customers represented 65% of fiscal 2025 revenue. The Icahn Group also owned 10% of the common stock as of February 2026, so large sale headlines could move the stock.
In one breath
What does Centuri Holdings do?
Centuri builds, repairs, and maintains gas and electric utility networks. Its crews work on pipes, power lines, storm repair, data center infrastructure, and other utility projects.
Why is Centuri trying to do more bid work?
Bid work can have better margins than long-term utility contract work. The tradeoff is that each project has more cost, timing, and execution risk.
Why does data center demand matter for Centuri?
Data centers need power, cooling, gas, sewer, water, and related infrastructure. Management stated that close to $300M of data center work was in final negotiations, which could provide a major near-term boost.
What is the main risk for CTRI stock?
The main risk is that the 2029 plan is too ambitious. Centuri must grow revenue, improve margins, scale crews, and manage more bid projects without major cost overruns or inflation eating the profits.
