Arcosa Q2 2026 earnings: EBITDA margin expands as free cash flow turns negative

Arcosa (NYSE: ACA) reported Q2 2026 continuing-operations revenue of $658.7 million, up 2% from $647.5 million, while diluted EPS from continuing operations was unchanged at $1.03. Adjusted EBITDA increased 5% and its margin expanded 60 basis points, but higher working-capital use and capital spending pushed quarterly free cash flow into negative territory.

Key Results

Revenue growth remained modest as higher utility structures and trench-shoring activity offset planned wind tower declines and weather-related pressure on construction materials. Adjusted profitability grew faster than revenue, with utility structures and improved aggregates unit economics supporting the increase.

The following results are for continuing operations and exclude the barge business, which Arcosa sold on April 1, 2026. Prior-year figures were recast on the same basis.

GAAP results included a $13.0 million gain from selling undeveloped industrial land in Mexico. That gain was excluded from adjusted segment EBITDA, as were acquisition and divestiture-related costs.

Business and Segment Performance

The two segments diverged during the quarter. Engineered Structures produced the stronger earnings growth as utility structures more than offset lower wind tower, lighting, and telecom activity, while Construction Products was constrained by rainfall and asphalt weakness.

Construction Products nevertheless improved aggregates unit profitability through lower unit costs, despite higher energy expenses. Its overall segment margin edged lower because of reduced asphalt volumes and a less favorable paving-project mix.

Weather limited Construction Products growth

Construction Products revenue benefited from higher trench-shoring volumes and recent aggregates acquisitions. These contributions were partly offset by lower organic aggregates and asphalt revenue after heavy rainfall disrupted operations, particularly in Texas.

Aggregates volume declined 2% overall, with organic volume down by a mid-single-digit percentage. Freight-adjusted average selling price increased 1%, with recent acquisitions diluting pricing. Even so, aggregates adjusted cash gross profit margin expanded 190 basis points to 48.1%, and cash gross profit per ton rose 5% as unit costs declined 3%.

Utility structures offset planned wind tower declines

Utility and related structures revenue grew 12% on higher volume and pricing. This growth more than compensated for the planned 19% decline in wind tower revenue and lower lighting and telecom volumes, enabling Engineered Structures to expand its adjusted EBITDA margin by 180 basis points.

Utility and related structures ended the quarter with a record $648.1 million backlog, up 49% from the beginning of 2026. Arcosa expects to recognize 71% of that backlog during 2026. Wind tower backlog was $537.4 million, with 28% expected to be recognized in 2026 and 66% in 2027.

EBITDA Margin Expanded, but Working Capital and Capex Drove Negative Free Cash Flow

Adjusted EBITDA margin improved even as several GAAP expenses increased. Acquisition and divestiture-related costs reached $14.5 million, including expenses associated with the pending CRH transaction, compared with $0.5 million a year earlier. Excluding those costs, corporate selling, general, and administrative expenses increased to $16.1 million from $15.7 million, mainly because of compensation expenses.

Interest expense declined by $5.4 million to $23.1 million due primarily to lower outstanding debt. That benefit was partly offset by a higher effective tax rate of 18.3%, up from 11.4%, reflecting reduced AMP tax credits associated with lower wind tower volumes and a smaller compensation-related benefit.

The improvement in adjusted earnings did not translate into quarterly cash generation. Operating cash flow from continuing operations fell to negative $24.7 million, primarily because working-capital cash use increased by $55.5 million. Higher Engineered Structures receivables were the main driver, partly offset by increased advance billings and accrued liabilities.

Capital expenditures increased by $31.8 million to $58.8 million as Arcosa invested in its core growth platforms. Combined with the working-capital outflow, this pushed quarterly free cash flow to negative $51.0 million from positive $16.8 million. On a six-month basis, however, free cash flow improved slightly to negative $29.8 million from negative $32.3 million.

Arcosa ended the quarter with $432.1 million in cash and cash equivalents, no borrowings under its $700 million revolving credit facility, and a net debt-to-adjusted EBITDA ratio of 1.9 times.

The Barge Sale Distorted Total Net Income but Increased Liquidity

Arcosa completed the $450 million sale of its barge business on April 1, receiving approximately $429.9 million in net cash proceeds. The transaction produced a $359.7 million pre-tax gain classified within discontinued operations.

As a result, total net income rose to $328.5 million and total diluted EPS reached $6.67, but those figures are not directly representative of the remaining business. Income from continuing operations was $50.9 million, while discontinued operations contributed $277.6 million of net income and $5.64 of diluted EPS.

Arcosa used $83.0 million of the sale proceeds to prepay part of its term loan. It also spent a combined $24.9 million on two Construction Products acquisitions involving recycled aggregates operations in New Jersey and an expansion into Colorado.

Pending CRH Acquisition

Arcosa and CRH entered into an agreement under which CRH will acquire Arcosa in an all-cash transaction for $150 per share. The companies expect the transaction to close in the first quarter of 2027, subject to Arcosa shareholder approval, regulatory clearance, and other customary conditions.

A special shareholder meeting is scheduled for September 4, 2026. Because the transaction is pending, Arcosa did not hold a quarterly earnings call and has suspended its practice of providing financial guidance.

Risks Investors Need to Watch

• Weather and energy costs: Heavy rainfall reduced organic aggregates and asphalt activity, particularly in Texas, while higher energy costs created additional pressure. Continued disruption could constrain Construction Products revenue and profitability.
• Dependence on utility structures to offset weaker categories: Utility structures currently compensate for lower wind tower, lighting, and telecom volumes. Execution against the record utility backlog will be important to sustaining segment growth.
• Cash conversion: Higher receivables and increased capital expenditures caused a sharp quarterly decline in operating and free cash flow despite higher adjusted EBITDA.
• Lower wind tower volumes: The planned volume decline reduced both segment revenue and AMP tax credits, contributing to the higher effective tax rate.
• CRH transaction execution: Completion remains subject to shareholder and regulatory approvals. The pending deal is also generating transaction costs and has led Arcosa to suspend financial guidance.

Summary

Arcosa’s Q2 2026 results showed limited revenue growth but improved adjusted profitability, led by utility structures and stronger aggregates unit economics. Those gains offset planned wind tower weakness and weather-related construction pressure, but higher receivables and capital spending caused free cash flow to turn negative. The main operating indicators ahead are utility backlog conversion, construction-materials volumes, and cash conversion, while completion of the pending CRH acquisition remains the principal corporate event.