ENR Top 400 Sourcebook: Businesses feel a pinch for profitability

For the second year in a row, Top 400 revenue rose by a double-digit percentage, rising 13.9% to $556.9 billion from $488.98 billion last year, while average company revenue also increased 10.9% to $629.5 million. Additionally, of the 375 companies that submitted surveys for both the 2024 and 2023 rankings, 77.3% reported more general recruitment revenue. But that’s down slightly from 78.9% in last year’s survey.

“Rising interest rates have made it difficult for some customers to get construction loans,” says Matthew Hott, CFO of Primus Builders. While that hasn’t reduced contractor No. 278’s backlog, he says the delays can affect the start of the project, “which can move financial activities from one year to the next in some cases.”

Inflation rates are still above the Federal Reserve’s target average, and some contractors are finding cost increases “a more manageable and predictable challenge than [they were] a couple of years ago,” says Anthony Johnson, Clayco’s executive vice president and president of its industrial business unit. For other contractors, the ability to manage this challenge depends on the company’s ability to adjust labor resources that are already tense.

As owners turn their attention to opportunities in lower-risk sectors, the top 400 revenue figures illustrate how contractors are keeping up with demand.

From 2022 to 2023, revenues increased in all sectors tracked by ENR, except for hazardous waste, which fell by 9.7%. The largest growth was seen in manufacturing (+74.8%), petroleum (+46.7%), sewer/waste (+38.8%) and water supply (+28.6 %). The manufacturing market in particular grew exponentially, with total general contracting revenue increasing 201% from 2021 to 2023. By 2021, 115 companies in the top 400 had at least some manufacturing revenue. By 2023, this number increased to 142.

Across the industry, the top 400 contractors say projects funded by the bipartisan Infrastructure Act, the Science and CHIPS Act and the Lower Inflation Act are also creating more opportunities. Despite an abundance of projects in some sectors, contractors say others are slowing because they need more commitment from owners to justify the risks.

In the multifamily residential building industry, Wieland CEO Edward Lorenz says the No. 318 company has seen many deals delayed or scrapped entirely because of higher interest rates. “These customers must rethink [return on investment] targets, or increase rents, and rents are already at record highs,” he says.

At Dallas-based MYCON, rising interest rates have reshaped the sector composition of its project portfolio as owners shift to sectors that will yield higher near-term returns.

Of the 314 contractors that reported their profitability status, 97.5% said they made a profit domestically, while 97.1% saw a profit internationally. The average internal profit margin is 4%, up from 3.2% last year.

In addition, the top 400 contractors see constant pressure to keep projects profitable.

Turning to recent work, Clancy & Theys chairman Baker Glasgow says the firm, ranked 120th, faced challenges managing changing project schedules, supply chain disruptions and meet labor demands.

Still, even as the U.S. moves toward an energy transition with electric vehicles, the top 400 companies say there’s a steep technical learning curve for contractors to get electrical infrastructure and projects ready. manufacturing, and an even steeper schedule for owners looking for returns on investment.

Like many of the top 400 contractors, “the Inflation Reduction Act and the CHIPS Act have led to a wave of new projects” for Gray Construction, which ranks No. 40, says President and CEO Brian Jones. He adds that the firm sees “an increase in projects related to electric vehicles, solar panels and semiconductors emerging.”

To reduce risk and build more predictability into projects, Jones says Gray has developed a preconstruction phase, which includes multiple value engineering sessions that are “deliberate” and a “collaborative” engagement of all project stakeholders. project to determine the best value solutions. “Understanding our customer’s decision. The manufacturing process is key to our preconstruction strategy,” says Jones.

The articles

Jonathan Keller is ENR’s associate editor for business surveys and rankings. He works on ENR’s Top Lists, collecting, cleaning and analyzing data. Jonathan has a background in data analysis, freelance writing, and tragic sports fandoms. A Buffalo native (and therefore a Bills and Sabres fan), he now lives in New York City.