Electricity Demand And Decarbonization Will Reshape Energy Infrastructure

Key Takeaways

• Rising demand for energy infrastructure and sustainability aligns with Willdan’s solutions, fueling strong growth, multi-year contracts, and enhanced revenue visibility.
  
• Expansion into technology-driven services and disciplined cost management are driving recurring revenues, margin improvements, and gains in profitability.
  
• Heavy reliance on public sector contracts, project timing risks, industry competition, and rising labor costs threaten revenue stability, margin strength, and long-term earnings predictability.

Catalysts

Provides professional, technical, and consulting services primarily in the United States.

• Accelerating electricity demand from AI/data centers and electrification of buildings/transportation is creating a structural increase in energy infrastructure needs, materially expanding Willdan’s project pipeline and supporting sustained double-digit organic revenue growth.
  
• Heightened urgency for decarbonization, energy efficiency, and sustainability from utilities, commercial clients, and government entities—driven by environmental policies, ESG mandates, and local/state-level funding—directly aligns with Willdan’s core service offerings and is expected to deliver multi-year contract opportunities, positively impacting future revenues and revenue visibility.
  
• Expansion into higher-margin, technology-driven services (like smart energy analytics, grid optimization, and advanced engineering solutions), combined with cross-selling from recent strategic acquisitions in key growth verticals such as data centers, is expected to further increase recurring revenues and drive margin expansion.
  
• A growing base of large, multi-year utility and municipal contracts (e.g., the $330M LADWP program ramping up in late 2025) provides substantial forward revenue visibility and operating leverage, which could support improved EBITDA margins and earnings growth as these contracts ramp.
  
• Effective cost discipline, scalable infrastructure, and ongoing investments in analytics and program management are enhancing operating leverage, which, combined with strong organic growth, is likely to drive continued gains in both net margins and earnings per share.

Willdan Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Willdan Group's revenue will grow by 11.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.1% today to 5.9% in 3 years time.
• Analysts expect earnings to reach $47.8 million (and earnings per share of $2.97) by about July 2028, up from $24.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.9x on those 2028 earnings, down from 47.3x today. This future PE is greater than the current PE for the US Professional Services industry at 23.7x.
• Analysts expect the number of shares outstanding to grow by 3.59% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.71%, as per the Simply Wall St company report.

Willdan Group Future Earnings Per Share Growth

Risks

• Exposure to tariff risks on specialized equipment could lead to significant price escalations or project delays if costs rise and equipment becomes uneconomical; while not yet material, this uncertain environment could impact project profitability and timing, affecting future margins and earnings.
  
• A large portion of Willdan’s revenue is from state and local governments and utilities, but only 15% is forecasted from commercial customers; this ongoing reliance on public sector clients exposes the company to volatile funding environments and economic downturns in municipal finance, potentially causing unpredictable revenue streams and higher earnings volatility.
  
• Revenue concentration remains high with large multiyear contracts (e.g., the $330M LADWP contract), and delays or gaps in the ramp-up and execution of such projects can result in short-term revenue swings and operating leverage compression, making earnings and revenue less predictable.
  
• Intense competition and consolidation within the engineering, energy, and consulting industries may result in more aggressive pricing, lower project win rates, and margin pressure, especially as larger competitors seek to win turnkey or integrated solutions from Willdan’s client base, directly impacting revenue growth and net margin.
  
• Wage inflation, increased demand for highly skilled engineers, and higher incentive compensation tied to recent stock gains have already pressured G&A expenses; if Willdan is unable to continue attracting and retaining technical talent amid a competitive labor market, this could lead to rising costs and depressed net margins in the long term.

Valuation

• The analysts have a consensus price target of $73.5 for Willdan Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $85.0, and the most bearish reporting a price target of just $62.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $815.5 million, earnings will come to $47.8 million, and it would be trading on a PE ratio of 29.9x, assuming you use a discount rate of 6.7%.
• Given the current share price of $79.31, the analyst price target of $73.5 is 7.9% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.