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This guide provides a filing-based method for reading 10-K annual reports and 10-Q quarterly reports. It is an analysis framework, not a buy-or-sell recommendation.
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1. Start with what the company actually does
Construction and maintenance-services companies can look similar in a stock screener while having very different economics. One issuer may build large utility or energy projects lasting several years; another may perform short-duration repairs, operate under master service agreements (MSAs), or provide recurring operations and maintenance services. Those differences affect revenue timing, profit volatility, backlog visibility, working capital and cash flow.
Read the filing’s Business section before looking at earnings per share. The U.S. Securities and Exchange Commission says this section describes a company’s products and services, markets, competition, regulation, labor issues, special operating costs and seasonal factors. See the SEC’s guide, How to Read a 10-K.
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Map the service lines and end markets
Write down each operating segment and the end markets it serves. For example, Primoris Services Corporation describes utility and energy services that include project contracts and MSAs in its 2025 Form 10-K, filed in February 2026. That mix is important: an awarded project can create a different revenue pattern from a call-off under an MSA, while recurring maintenance work may have shorter duration and different visibility. Read the company’s own description in the Primoris 2025 Form 10-K.
Record the operating variables
- Contract duration: Identify long-duration projects separately from short-duration repairs and service calls.
- Pricing model: Note fixed-price, unit-price, cost-plus, time-and-materials and MSA work.
- Customers: Record public-utility, energy, industrial, commercial or government exposure and any customer concentration.
- Geography and seasonality: Weather, permitting cycles and regional labor availability can move work between quarters.
- Labor and subcontractors: Look for dependence on skilled labor, subcontractor capacity and material availability.
Do not interpret a margin change until you know which of these variables changed.
2. Read the filing in the order that answers an investor’s questions
The headline income statement is the end of a chain. Read the filing in an order that exposes the chain’s assumptions.
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- Business: Learn the segments, services, customers, contract types, markets and seasonality.
- Risk Factors: Identify risks involving labor, materials, project execution, customer concentration, regulation, weather, safety, claims and financing.
- Management’s Discussion and Analysis (MD&A): Read management’s explanation of results, liquidity, capital resources, known trends, uncertainties, contractual obligations and critical accounting judgments.
- Audited financial statements and notes: Verify revenue, segment results, contract balances, debt, leases, commitments, contingencies and cash flows against the narrative.
- Quarterly comparisons: In a 10-Q, compare the current quarter with the same quarter of the prior year and with the current year-to-date period.
The SEC describes MD&A as the place to examine material changes from the prior period, liquidity and capital resources, off-balance-sheet arrangements and critical accounting policies. Its investor guidance is available at sec.gov/answers/reada10k.htm.
Separate operating change from timing
When revenue or margin moves, classify the cause before judging it. The filing may attribute a change to project volume, contract mix, an acquisition, seasonality, a cost-estimate revision, a claim or change order, or an unusual item. A quarter with unusually high project completions is not automatically a sustainable run rate, particularly when the company describes seasonal work or irregular project timing.
3. Understand how contract accounting creates reported revenue
Many construction and infrastructure contracts satisfy performance obligations over time. Under ASC 606, an over-time conclusion depends on applicable criteria such as the customer receiving benefits as the contractor performs, the customer controlling an asset as it is created, or the asset having no alternative use while the contractor has an enforceable right to payment for work completed. The SEC-filed disclosure explaining these criteria and the five-step model is in the CETY Form 10-Q ASC 606 disclosure.
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Cost-to-cost progress measurement
For an over-time obligation, the company must select a measure of progress. Quanta Services describes unit-price, cost-plus and fixed-price contracts. For fixed-price contracts and unit-price contracts with significant partially completed units, it generally measures progress by comparing costs incurred with total estimated costs for the performance obligation. Quanta reported that 63.8% of its 2025 revenue was associated with this cost-to-cost method for the described fixed-price and qualifying unit-price obligations. That is an issuer-specific figure for Quanta’s 2025 reporting period, not an industry benchmark; see its 2025 Form 10-K.
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Questions to ask about estimate-at-completion changes
- Did labor productivity or labor availability improve or worsen?
- Were material prices, quantities or delivery dates different from the original estimate?
- Did subcontractor performance or pricing change?
- Were claims, change orders or customer approvals included in the revised estimate?
- Did the company record a loss provision on a contract expected to be unprofitable?
- Was the margin change spread across many projects or concentrated in one large job?
Primoris states that revenue recognized using cost-to-cost progress relies on estimates and that actual variations can affect profitability and cash flows. Treat a favorable estimate revision as evidence requiring explanation, not as recurring growth until the filing shows that execution supports it.
4. Read contract assets, contract liabilities and receivables together
Recognized revenue is not the same as cash collected. Contract terms can allow revenue recognition before billing, or billing before the related work is recognized.
What the balances mean
- Contract asset: Revenue recognized ahead of the amount currently billable under the contract.
- Contract liability: Customer billings or advances received ahead of revenue recognition.
- Receivable: An amount billed and owed by the customer, subject to collection risk.
Quanta explains that interim payments and progress-based revenue can create both contract-asset and contract-liability balances. A rise in contract assets is not automatically a warning: it may reflect billing terms, project growth or ordinary timing. It deserves more scrutiny when it persists alongside slower receivable collections or weak operating cash flow.
A practical reconciliation
- Find contract assets, contract liabilities and accounts receivable in the balance-sheet notes.
- Compare each balance with the prior quarter, prior year and year-to-date revenue.
- Read the explanation of billing milestones, retainage, unbilled amounts and customer acceptance.
- Check whether operating cash flow lagged net income while contract assets or receivables rose.
- Look for subsequent billing and collection information in the next filing.
Do not label a contract asset “bad” solely because it increased. The relevant question is whether the balance converts to billings and cash in line with the contract and the company’s stated expectations.
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5. Treat backlog as a defined, conditional measure
Backlog can indicate awarded or otherwise identified work, but it is not guaranteed future revenue, profit or cash. Each company defines and calculates it differently.
Primoris cautions that its backlog may include certain awards, work orders and amounts management considers probable. Delays, cancellations, scope changes, cost changes, award timing and service mix can affect conversion. Its filing says backlog at a point in time may not predict revenue or net income for a particular period and should not be relied on alone; review the qualification in the Primoris 2025 Form 10-K.
Build a backlog definition sheet
For every issuer, record the following before comparing the headline number:
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- Whether backlog includes signed contracts only, probable awards, work orders, options or MSA amounts.
- How cancellable work, joint ventures and customer termination rights are treated.
- Whether pass-through subcontractor and material amounts are included.
- The expected period over which the backlog should convert to revenue.
- Whether the measure is called backlog, remaining performance obligations or something else.
- What the company excludes and how it updates the estimate.
Compare backlog direction and conversion over several periods. A larger figure is not inherently better if it contains lower-margin work, more pass-through costs, weaker contractual commitment or a longer conversion period.
6. Analyze a quarterly earnings release without mistaking it for the filing
Use the earnings release as an index, then verify its claims in the 10-Q or 10-K. For the current quarter, compare:
| Comparison | Why it matters |
|---|---|
| Current quarter versus prior-year quarter | Controls for many seasonal effects and reveals year-over-year volume and margin change. |
| Current quarter versus immediately prior quarter | Shows sequential momentum but can be distorted by project timing and seasonality. |
| Year-to-date current period versus prior-year year-to-date | Tests whether a single-quarter result is supported by cumulative performance. |
| Net income versus operating cash flow | Shows whether reported earnings are converting into cash after working-capital movements. |
Decompose revenue growth
Ask whether growth came from organic project volume, pricing, acquisitions, a change in contract mix, favorable estimate revisions, claims or change orders. If an acquisition contributed, separate acquired revenue from the legacy business. If management reports a percentage change without that bridge, use the segment note and MD&A to construct one.
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Decompose margin change
Look for labor productivity, material costs, subcontractor costs, project closeouts, schedule acceleration, weather, claims and estimate-at-completion revisions. A margin increase supported by completed work and stable estimates has a different quality from one driven by a one-time favorable adjustment.
7. Read the balance sheet and cash-flow statement as an execution test
Construction can grow accounting revenue while consuming cash. Projects may require labor and materials before billing milestones are reached, while customer advances can temporarily provide cash before revenue is recognized.
Working-capital checkpoints
- Receivables: Compare growth with billed revenue and investigate slower collections or concentrated customer balances.
- Contract assets: Determine whether unbilled revenue is converting to billings as expected.
- Contract liabilities: Identify whether customer advances are funding current work and when they are expected to become revenue.
- Retainage: If disclosed, assess the timing and collectability of amounts withheld until completion or acceptance.
- Inventory and materials: Check for unusual accumulation, shortages or price exposure.
Capital and financing
Review equipment purchases, leases, debt maturities, interest expense, acquisitions, dividends and share repurchases. Reconcile management’s liquidity discussion with the cash-flow statement and debt notes. A company may report adequate liquidity while facing significant seasonal working-capital needs or upcoming maturities; the dates and available facilities matter more than a generic liquidity statement.
The SEC’s 10-K guidance specifically directs investors to liquidity, capital resources, contractual obligations, off-balance-sheet arrangements and critical judgments. Use the SEC investor guide as a checklist for these disclosures.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.8. Compare construction-services stocks on like-for-like dimensions
Do not rank companies from raw revenue, margin or backlog figures until their definitions and contract economics are reconciled.
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|---|---|---|
| Service and end-market mix | Utility, energy, industrial, commercial, government, repair and recurring maintenance exposure. | Different markets have different cycles, margins, seasonality and project duration. |
| Contract structure | Fixed-price, cost-plus, unit-price, time-and-materials and MSA work. | Risk, billing and estimate sensitivity vary by pricing model. |
| Customer concentration | Largest customers, contract counterparties and renewal or cancellation rights. | One customer event can affect revenue, backlog and receivables disproportionately. |
| Backlog definition | Signed work, probable awards, options, MSAs, joint ventures, pass-through amounts and conversion period. | Two similarly named backlog figures may represent different levels of commitment. |
| Revenue-recognition method | Cost-to-cost progress, other over-time measures and point-in-time recognition. | Reported revenue and margin may respond differently to estimates and project milestones. |
| Contract balances | Contract assets, liabilities, receivables and retainage trends. | Revenue timing and billing timing can diverge materially. |
| Cash conversion | Operating cash flow relative to net income across multiple periods. | One quarter can be distorted by mobilization, advances or billing milestones. |
| Leverage and allocation | Debt maturities, interest, equipment spending, acquisitions, dividends and buybacks. | Similar operating profits can support different financial-risk profiles. |
Primoris and Quanta illustrate why this normalization is necessary: their filings describe different mixes of contract structures and progress-measurement practices. Compare the disclosures, not only the totals, in the Primoris filing and Quanta filing.
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9. Red flags that deserve a deeper filing review
None of these indicators proves a problem by itself. They are prompts to read the related note and management explanation.
- Revenue rises while operating cash flow remains weak over several periods.
- Contract assets or receivables grow faster than revenue without a clear billing explanation.
- Margins jump because of a large favorable estimate revision, claim or change order.
- Loss provisions appear on projects that were previously described as profitable.
- Backlog rises mainly through probable awards, options or MSAs whose cancellation and conversion terms are unclear.
- Backlog grows while expected conversion time lengthens or service mix shifts toward lower-margin work.
- Customer concentration increases, or a major customer has termination, acceptance or payment rights that limit visibility.
- Debt, lease obligations or acquisition spending increase faster than recurring cash generation.
- Management emphasizes adjusted or non-GAAP results while giving limited reconciliation to GAAP results.
10. A repeatable 60-minute earnings-report worksheet
- Five minutes — identify the business: List segments, end markets, contract duration, pricing models, customers, geography and seasonality.
- Ten minutes — read MD&A: Mark every explanation for volume, mix, acquisitions, estimate changes, claims, change orders and unusual items.
- Ten minutes — inspect contract accounting: Record over-time versus point-in-time recognition, progress measures, estimate-at-completion changes and loss provisions.
- Ten minutes — inspect visibility: Capture backlog definition, exclusions, expected conversion period and cancellations or delays.
- Ten minutes — reconcile cash: Compare net income with operating cash flow and explain movements in receivables, contract assets, contract liabilities, retainage and capital spending.
- Ten minutes — test financial capacity: Note debt maturities, interest, leases, acquisitions, equipment purchases and distributions.
- Five minutes — write the conclusion: State which operating facts explain the quarter, which estimates remain uncertain and what must be monitored in the next filing.
11. How to handle non-GAAP measures
Adjusted EBITDA, adjusted earnings and similar measures can help isolate items management considers unusual, but each company chooses its own adjustments. Reconcile every non-GAAP figure to the nearest GAAP measure and ask whether the excluded items recur in project businesses, such as acquisition costs, restructuring, stock compensation or contract-related charges.
The SEC’s investor guidance puts the decision plainly: “As an investor, it is up to you to decide how much weight to give to non-GAAP measures.” Read the full guidance at How to Read a 10-K.
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12. The conclusion your analysis should reach
A useful earnings reading does not end with “revenue beat” or “backlog increased.” It explains how the company’s contract work moved through the accounts: what was performed, how progress was estimated, what changed in expected cost, when the customer was billed, whether receivables and contract assets converted, and whether operating cash flow followed profit.
Only after those links are clear should you compare one construction or maintenance-services stock with another. Differences in service mix, contract terms, backlog definitions, accounting judgments, customer concentration, leverage and cash conversion can make an apparently superior headline result an apples-to-oranges comparison.
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