IES Holdings (IESC): A Bull Case in Infrastructure Growth and Strategic Brand Momentum

The U.S. infrastructure sector is undergoing a seismic shift, driven by surging demand for data centers, renewable energy systems, and smart commercial facilities. Amid this transformation, IES Holdings (IESC) is positioning itself as a key beneficiary, leveraging strategic investments and brand-enhancing partnerships to capitalize on long-term tailwinds. With a robust earnings trajectory, a compelling valuation, and a recent sponsorship of Formula 2 star Jak Crawford, IESC emerges as a compelling growth story for investors.

Earnings Fundamentals: A P/E Ratio Anchored in Growth

While the trailing P/E ratio of 25.7 as of June 2025 may appear elevated compared to its 2022 level of 18.6, it remains favorably positioned against peers. For instance, competitors such as Quanta Services (PWR) trade at a P/E of 57.4, while Emcor (EME) sits at 22.6. . IES's valuation is justified by its accelerating growth in high-margin segments. In Q2 2025, its Communications segment—focused on data centers and corporate tech facilities—reported a 41% year-over-year revenue jump to $273.1 million, with operating income doubling to $39.6 million. This segment's expansion is underpinned by a $50 million Birmingham facility, which produces custom-engineered power systems for hyperscale data centers. .

Strategic Moves: Dominating Data Centers and Smart Infrastructure

IES's aggressive acquisitions and organic investments are solidifying its leadership in critical infrastructure. The 2025 acquisition of Arrow Engine Company expanded its capacity to serve natural gas and industrial markets, while the Birmingham facility underscores its commitment to high-margin projects. The company's Infrastructure Solutions segment, which grew 55% year-over-year to $117.6 million, now includes custom solutions for renewable energy and smart grid systems.

The $300 million credit facility amendment—transitioned to a cash flow-based structure—provides ample liquidity to fund further expansion. With a non-GAAP backlog of $1.8 billion and remaining performance obligations (RPO) at $1.2 billion, IES has visibility into future revenue streams, particularly in data centers and commercial infrastructure. This robust pipeline supports a bullish outlook, even as the residential segment faces headwinds from mortgage rate hikes.

Brand Momentum: Jak Crawford Sponsorship and Talent Recruitment

IES's recent sponsorship of Formula 2 driver Jak Crawford adds a dynamic layer to its growth narrative. Crawford's 2025 achievements—including victories at Monaco and Barcelona—elevate IES's brand visibility among global audiences. Beyond marketing, this partnership directly addresses labor shortages in skilled trades. With over 500,000 unfilled trades jobs in the U.S., IES is using Crawford's platform to attract young talent to electrical and construction careers. As CEO Jeff Gendell noted, “Jak's energy mirrors our own innovation spirit.”

The sponsorship also serves as a recruitment tool: high-performing employees receive Formula 1 race tickets, boosting morale. This dual focus on brand prestige and workforce development positions IES as a forward-thinking employer in a competitive labor market.

Investment Thesis: Bull Case Drivers

1. Sector Tailwinds: Data center spending is projected to hit $250 billion globally by 2026, with IES's technical expertise and Birmingham facility ideally placed to capture this demand.
2. Valuation Advantage: At a P/E of 25.7, IES trades at a discount to peers like PWR (57.4) while delivering superior earnings growth in core segments.
3. Balance Sheet Strength: The extended credit facility and $1.8 billion backlog reduce execution risk, ensuring capital allocation flexibility.
4. Brand Differentiation: The Crawford partnership enhances IES's recruitment capabilities, mitigating labor constraints that plague many construction firms.

Risk Considerations

• Residential Sector Drag: Slowing single-family housing demand could continue to pressure margins in IES's residential segment.
• Competition: Rivals like Dycom (DY) and Quanta (PWR) are also expanding in data centers, though IES's Birmingham facility and Arrow Engine acquisition provide differentiation.

Conclusion: A Growth Catalyst in Volatile Markets

Despite macroeconomic uncertainty, IES's strategic focus on high-growth infrastructure and its brand-enhancing initiatives create a compelling investment case. With a P/E ratio that balances growth and value, and a backlog signaling sustained demand, IESC is well-positioned to outperform peers. Investors seeking exposure to the data center boom and U.S. infrastructure rebuild should consider a long position in IES Holdings, particularly as the stock trades at a 15% discount to its 2024 highs.

Historically, buying IESC one day before quarterly earnings announcements and holding for 30 trading days since 2022 has generated an average return of 13.72%, though with significant volatility—peaking at a maximum drawdown of -52.96%—and a Sharpe ratio of 0.11, indicating low risk-adjusted returns. While the positive return aligns with the company's earnings-driven growth narrative, the elevated risk underscores the need for caution in volatile markets.

. The upward trajectory in both metrics supports a bullish outlook, especially as IES capitalizes on its Birmingham facility's potential. For growth-oriented portfolios, IESC is a buy.