On August 7, Construction Partners (NASDAQ:ROAD) held its fiscal third-quarter 2026 earnings call and used it to raise guidance for the second time this year. Revenue climbed 28.2% year-over-year to $999.4 million, and the company closed the quarter with a record $3.36 billion project backlog. Operationally, the infrastructure and asphalt provider is focusing its growth strategy on two key drivers: expanding its commercial footprint in AI data center construction and navigating ongoing federal transportation funding debates in Washington.
Bull Case: Growth That Keeps Compounding
CPI’s quarter split roughly two ways: 8.9% organic growth and 19.3% from acquisitions, together pushing adjusted EBITDA up 24% to $163 million. Net income landed at $59.6 million, with adjusted EPS of $1.08. Management pointed to more than 1,000 commercial projects expected across its 8 states and 115-plus local markets this year, including a fast-growing data center vertical. In Texas, its Lone Star Paving unit is already working data center jobs with a pipeline exceeding $100 million, and in Oklahoma, the newly acquired Ellsworth Construction adds a further $100 million of active data center work with over $130 million more in the pipeline.
On the public side, CPI won airfield paving work at Pensacola International Airport and more than $80 million in Florida DOT rest-stop contracts along I-4. Management also argued that a proposed federal bill, BUILD America 250 Act, would fund highways at roughly 7.2% above prior levels, and noted that the last three transportation bills all ended up richer than their initial House versions.
Bear Case: Cracks Beneath The Surface
Not every line moved the right direction. Gross margin actually slipped slightly, to 16.8% from 16.9% a year earlier, even as revenue surged, with management citing energy cost inflation and unusually wet weather in May. The balance sheet tells a similar story of progress with strings attached: debt to trailing EBITDA fell to 3.1x, but CPI just added a $300 million incremental term loan and expanded its revolver to $700 million, meaning the leverage reduction came alongside fresh borrowing.
On the funding side, management admitted the legislative calendar is tightening as midterms approach, raising the odds Congress leans on a continuing resolution rather than passing a new multiyear bill. And while CPI says a CR wouldn’t disrupt fiscal 2027 activity, roughly 45% of the prior infrastructure law’s funding still hasn’t even been deployed, leaving real uncertainty about pacing.
What The Numbers Whisper
Hedge fund ownership of Construction Partners slipped from 26 funds to 22 last quarter, a pullback rather than an accumulation. Short interest sits at 9.64% of float, a level that signals a genuine bear camp rather than background noise. Meanwhile, the stock trades at a forward P/E of 31.85 as of August 17, pricing in continued double-digit growth.
The Road Ahead Forks
Construction Partners closed the quarter with growth accelerating, a record backlog, and a new data center pipeline still in its early innings. But the same quarter showed thinner gross margins, fresh debt layered onto a balance sheet still above its own leverage target, and a federal funding calendar that keeps drifting toward uncertainty. For the growth story to hold, the data center pipeline and acquisition pace need to keep converting into backlog the way they have all year.
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