How does the inclusion of additional scopes for powering data‑center campuses affect the company’s expected profit margins and cash‑flow generation?
Fundamental impact
Centuri’s $300 million award bundle is being bolstered by “additional scopes of work to power data‑center campuses” in Pennsylvania. Data‑center projects typically command higher engineering and service‑installation margins than traditional utility‑infrastructure jobs because they involve sophisticated power‑‑distribution, redundancy, and cooling‑system integrations that utilities charge premium rates for. Adding these higher‑margin components should lift Centuri’s overall gross‑margin profile for the contract cohort, dragging the company’s weighted‑average profit margin upward in the near‑term. Moreover, data‑center contracts are frequently structured as “turn‑key” or “as‑built” deals with milestone‑based progress payments, which accelerates cash‑collection cycles. The extra scopes therefore improve cash‑flow generation, expanding operating cash flow (OCF) and free‑cash‑flow forecasts for FY 2025 beyond the baseline outlook that the market has priced in.
Trading implications
The incremental margin and cash‑flow upside is not yet fully reflected in the equity price. Centuri’s shares have been hovering near a key resistance around $9.50 (the 200‑day SMA) with modest volume, while the weekly RSI is still in the 45‑50 range, suggesting room for a bullish breakout. A catalyst‑driven upside to $10‑11 looks plausible if the company issues an earnings‑beat guidance update that quantifies the data‑center margin lift (e.g., a 30‑40 bps improvement to net‑margin) and confirms the accelerated cash‑run‑rate. Conversely, investors should monitor execution risk—cap‑ex requirements for heavy‑duty substations and any potential cost‑inflation in copper or steel—that could compress those margins. In practice, a moderate‑risk long position with a stop just below $9.30 (recent swing low) aligns with the upside potential, while a short‑term swing to the upside can be booked around $10.80 if the stock tests the prior high on the next 1‑2‑week rally.