Civil infrastructure company Construction Partners (NASDAQ: ROAD) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 50.5% year on year to $779.3 million. On the other hand, the company’s full-year revenue guidance of $2.8 billion at the midpoint came in 0.6% above analysts’ estimates. Its non-GAAP profit of $0.81 per share was 1.4% below analysts’ consensus estimates.

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StockStory’s Take

Construction Partners delivered year-over-year sales growth and higher operating margins in Q2, despite missing Wall Street’s revenue and non-GAAP profit expectations. The company’s robust performance was shaped by strong execution against weather-driven delays, with CEO Fred Julius Smith highlighting the “discipline and delivered robust operational results, driving a record adjusted EBITDA margin of 16.9%.” Management credited its ability to flex operations and leverage three margin levers—market selection, vertical integration, and scale—even as persistent wet weather impacted project timing.

Looking ahead, management’s full-year guidance reflects confidence in sustained demand for civil infrastructure across the Sunbelt, supported by public funding and a growing project backlog. The addition of Durwood Greene Construction in Houston expands the company’s reach into a high-growth metro, and CFO Gregory Hoffman emphasized, “We have approximately 80% to 85% of the next 12 months revenue covered in backlog.” Management remains focused on balancing organic growth, strategic acquisitions, and deleveraging, while closely monitoring materials costs and maintaining capital discipline.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to weather-related disruption, disciplined cost management, and the successful integration of recent acquisitions, particularly in Texas and Houston.

• Weather resilience and margin levers: Despite one of the wettest springs on record in the Southeast, the company expanded margins by executing on its three core strategies—selecting growth markets, increasing vertical integration, and scaling operations. These levers helped offset fixed cost pressures from weather delays.

• Acquisition-driven expansion: The recent acquisitions of Lone Star Paving, PRI, and Durwood Greene Construction have rapidly increased Construction Partners’ scale in key markets, such as Houston. Management expects these moves to drive both immediate and future organic growth opportunities.

• Backlog strength: The project backlog reached $2.94 billion, with management noting that 80% to 85% of the next 12 months’ revenue is already covered. This backlog is evenly split between public and private projects, reflecting healthy demand in both segments.

• Favorable public funding environment: Management cited strong state infrastructure budgets and ongoing federal support through programs like the IIJA (Infrastructure Investment and Jobs Act) as key factors underpinning public project bidding and awards.

• Cost and cash flow discipline: General and administrative expenses declined as a percentage of revenue due to scaling, and the company converted 80% to 85% of EBITDA to operating cash flow, supporting both growth investments and deleveraging plans.

Drivers of Future Performance

Construction Partners’ outlook is anchored by continued public infrastructure funding, healthy private demand in the Sunbelt, and disciplined execution on acquisitions and cost management.

• Public infrastructure tailwinds: Management expects public spending on roads and bridges to remain robust, driven by state and federal programs. CEO Smith pointed to contract awards being up 14% in the company’s states, with further growth forecasted as migration to the Sunbelt continues.

• Acquisition integration and organic growth: The full-year guidance incorporates both organic growth in the high single digits and continued contributions from recent acquisitions. Management plans to update long-term targets after achieving prior goals ahead of schedule, with the acquisition pipeline focused on high-growth metro areas.

• Risks from input costs and weather: While materials prices like liquid asphalt and diesel have been stable, management noted that energy price volatility remains a potential headwind. Weather-related delays also remain an ongoing risk to project execution and revenue timing.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team is watching (1) the pace of organic growth and integration of recent acquisitions like Durwood Greene in Houston, (2) sustained strength in backlog conversion into revenue amid public and private sector demand, and (3) the company’s ability to manage input costs and maintain margin expansion. Progress on deleveraging and further capital deployment for strategic acquisitions will also be key signposts.

Construction Partners currently trades at $113.26, up from $93.55 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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