Freedom Broker analysts Sergey Glinyanov and Aruzhan Seifulla upgraded their recommendation on Argan (AGX) shares from “Hold” to “Buy” and maintained the target price at $700. From the price of $410.40 used in preparing the analytical report, the target implies upside potential of 70.57%.
A detailed breakdown of the company’s results, growth drivers, and risks is presented in Freedom Broker’s new analytical report.
Argan is a U.S. engineering and construction company. It designs, builds, and commissions power plants, industrial facilities, power and telecommunications networks. Most of its revenue comes from gas generation projects. The company’s shares trade on the New York Stock Exchange under the ticker AGX.
Argan revenue rose 61.5%
In the second quarter of fiscal year 2027, Argan’s consolidated revenue reached a record $384 million. The figure increased 61.5% year over year and by about 32% compared with the previous quarter.
Operating profit rose 89% to $56.8 million. Net income increased 51%, from $35.3 million to $53.3 million, and diluted earnings per share rose from $2.50 to $3.76.
According to Freedom Broker analysts, the results confirm successful execution of the company’s core projects. However, part of the revenue expected to be recognized later was already recorded in the second quarter. This may limit sequential growth in the coming quarters. Freedom Broker forecasts Argan’s revenue for fiscal 2027 at $1.35 billion, and earnings per share at $12.94.
Gas power plants supported results
Revenue in the power segment increased 52.9% year over year to $301.2 million. Growth was driven by higher volumes of work on four large gas generation projects, which are gradually replacing the contribution from solar power plants nearing completion.
The segment’s gross margin was 22.4% versus 19.6% a year earlier and 23.6% in the previous quarter. The sequential decline was in line with expectations: the current large projects are still at early stages of construction. As they move into subsequent phases, work volumes and revenue should increase.
Argan’s further performance will depend not only on execution of existing contracts, but also on winning new orders. Company management expects several projects—primarily in gas generation—to be awarded over the next 7–15 months. Previously, a 10–18 month range was cited.
The order backlog is gradually shrinking as current projects are completed. In the first half of the year, Argan recognized $675 million in revenue, while more than $260 million of backlog reduction was offset by expanded scope on existing contracts and small new orders.
Pressure on the industrial segment will be temporary
Industrial segment revenue rose 111.2% year over year to a record $76.2 million. At the same time, its gross margin declined from 12.5% to 7.3%. The deterioration is linked to several projects outside the data center market, analysts believe. After revising expected costs, their economic efficiency turned out to be lower than initial estimates. These works are planned to be completed within six months, so margin pressure may persist for another one to two quarters.
Freedom Broker analysts expect the impact of this factor on Argan’s overall results to be limited. Additional support for the industrial segment could come from a $125 million contract to supply thermal energy storage systems and cooling tanks for data centers. Such systems help remove heat from computing equipment and maintain the required temperature in facilities. Going forward, the project could generate more than $10 million in additional quarterly revenue.
Telecommunications segment revenue increased 39.5% to $6.6 million. It still accounts for only about 2% of consolidated revenue, but organic growth and the recent acquisition of a new asset could eventually double its revenue relative to fiscal 2026 levels.
Electricity demand remains a growth driver
In June, Freedom Broker already raised Argan’s target share price to $700, but kept the “Hold” recommendation. At the time, analysts pointed to improved financial forecasts, high company utilization, and data centers’ rising need for new power sources.
One confirmation of the industry trend was a gas power plant project in West Texas worth about $7 billion. Its capacity could reach 5,000 megawatts, and the generated electricity will be directed to supply a major data center complex.
This is not an individual investment recommendation.