Argan's Backlog Is 80% Natural Gas: Is Concentration a Risk?
Argan, Inc. AGX is increasingly tied to natural gas-fired power construction, with roughly 80% of its $2.5 billion backlog at July 31, 2026, represented by natural gas projects. Renewables accounted for about 11% and Industrial for 8%. Management expects complex combined-cycle projects to remain the majority of backlog over the near and medium term as utilities and developers seek reliable, around-the-clock generation.
The concentration brings both opportunity and risk. Argan currently has four U.S. gas-fired plants in backlog totaling more than 4.1 gigawatts, while construction is ramping across several large Texas projects. This exposure is benefiting from rising electricity requirements linked to data centers, manufacturing and broader electrification. The company also sees an advantage from the limited number of contractors capable of executing large, complex gas-fired projects, supporting its selective bidding strategy and potentially favorable project economics.
However, an 80% gas weighting reduces diversification and increases sensitivity to delays in large projects, changes in permitting or energy policy, equipment availability and shifts in customers’ generation strategies. Any slowdown in gas-project awards could therefore have an outsized impact on future backlog replenishment. Argan partly offsets this risk through renewable capabilities, Industrial projects and Teledata expansion. Its Industrial segment has a $125 million data-center project underway, while the ValCor acquisition broadens Teledata’s geographic reach and customer exposure.
Overall, natural-gas concentration raises portfolio risk, but current demand, execution capabilities and diversification efforts provide meaningful offsets.
Argan Faces Competition Across Gas-Fired Power EPC
Fluor Corporation FLR and Primoris Services Corporation PRIM are relevant competitors as Argan expands its exposure to natural gas-fired power construction. Fluor has extensive experience designing and building combined-cycle gas plants, including large EPC and commissioning projects, giving it the technical scale and execution record to compete for complex generation work. Fluor also operates across broader energy and infrastructure markets, providing diversification beyond gas-fired power.
Primoris likewise offers EPC and turnkey construction services across power generation and energy infrastructure. Primoris is increasingly targeting natural gas generation opportunities tied to data-center power needs while maintaining exposure to renewables, utilities and other infrastructure markets. For Argan, whose backlog is about 80% natural gas, competition from Fluor and Primoris could affect project awards and pricing. However, Argan’s execution record, selective bidding strategy and expertise in combined-cycle construction remain important differentiators as U.S. electricity demand drives new generation investment.
AGX Stock’s Price Performance & Valuation Trend
Shares of AGX have gained 15.2% year to date, outperforming the Zacks Building Products - Miscellaneous industry, as shown below.
AGX Price Performnace
Image Source: Zacks Investment Research
The stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 22.46, as the trend lines suggest below.
AGX Valuation
Image Source: Zacks Investment Research
Earnings Estimate Trend Favors AGX
AGX’s earnings estimates for fiscal 2027 and 2028 have increased over the past 60 days to $13.37 and $17.09 per share, respectively. The estimates for fiscal 2027 and 2028 imply year-over-year growth of 37.3% and 27.8%, respectively.
Image Source: Zacks Investment Research
Argan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
