LGN · Legence
Conviction · Medium · more likely to lead the S&P 500 over the next three months, by a modest margin
Wrong if: a daily close below $27.91
Note written ·
How this view changed
- · Rating raised from Low to Medium. Results, 12 November 2026: Legence's third-quarter revenue of $1.31 billion beat its $1.225–1.275 billion guide, full-year 2026 revenue guidance rose to $4.87–4.91 billion, a 2027 outlook was issued, and a $150 million buyback was authorized.
Price against the kill line
25.4% clear of its kill line on the 13 November 2026 close.
How to read this
The red mark is the price level of the published kill line: a close through it (a weekly close, on a weekly line) would prove the research note wrong on price. The dot is where the stock closed on 13 November 2026; a dot left of the mark has closed through its line.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close below $27.91, set on 12 November 2026. The shares are down 50.0% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close below $27.91, the 6 November 2026 close, which would erase most of the rebound from the $25.41 closing low of 5 November 2026 and show the market rejecting the results. Fourth-quarter revenue below the $1.26 billion low end of the guide would also break the case.
Research onlyNot in the portfolio.
The business · as of
Legence installs and engineers mechanical, electrical and energy-efficiency systems for data centers, life-sciences sites and commercial buildings, and earns money from project contracts and services. Revenue was $1,311 million in the quarter to 30 September 2026.
What is changing, and what follows · as of
- What is changing now
- On 12 November 2026 Legence reported third-quarter revenue of $1.31 billion, raised 2026 revenue guidance to $4.87–4.91 billion and gave a first 2027 range of $5.3–5.6 billion.
- What follows for the company
- Filed operating margin was 12.8% in the quarter to 30 September 2026 after −0.5% in the previous quarter; free cash flow was $298 million over four quarters against debt of $1,036 million.
- What follows for its customers, suppliers and competitors
- Blackstone (BX) affiliates, the controlling holders, sold stock in December 2025 and April 2026 and set the supply of shares; data center owners' project spending drives the backlog.
What the price assumes · as of
At the 13 November 2026 close (filed inputs to 12 November 2026) the shares trade at EV/sales 0.8, EV/EBIT 21.5 and P/E 60.4, with a free-cash-flow yield of 11.0%; that holds only if the operating margin stays near the 12.8% of the latest quarter rather than the −0.5% of the one before, while revenue keeps growing.
Key figures from the filings · Industrials
Quarter to 30 September 2026, filed 12 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 1,311
- Revenue, change on a year (%)
- +85.1
- Gross margin (%)
- 21.0
- Operating margin (%)
- 12.8
- Free cash flow, four quarters ($M)
- 298
- Net cash, cash less debt ($M)
- −695
- Price to earnings (×)
- 60.4
- Enterprise value to sales (×)
- 0.8
All filed numbers
What Legence reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 1,311 | +85.1 | 21.0 | 12.8 |
| first filed | 1,262 | +110.7 | 17.4 | −0.5 |
| first filed | 1,038 | +105.1 | 17.9 | 2.2 |
| first filed | 738 | +34.6 | 20.0 | −3.2 |
| first filed | 708 | +26.2 | 20.9 | 5.3 |
| first filed | 599 | — | 21.5 | 5.2 |
| Pre-tax income ($M) | 154 |
| Net income ($M) four quarters: 45.1 | 89.6 |
| Diluted shares, change on a year (%) | Not available |
| Operating cash flow ($M) | 372 |
| Capital spending ($M) | 73.4 |
| Free cash flow ($M) | 298 |
| Cash and short-term investments ($M) | 341 |
| Debt ($M) long-term debt and finance leases | 1,036 |
| Net cash, cash less debt ($M) | −695 |
| Deferred revenue ($M) +68.6% on a year | 482 |
| Backlog, orders not yet delivered ($M) +77.2% on a year | 4,108 |
| Receivables ($M) | 842 |
| Inventory ($M) | 15.4 |
| Shareholders' equity ($M) | 683 |
| Market value ($M) | 2,723 |
| Enterprise value, market value plus net debt ($M) | 3,419 |
| Enterprise value to sales (×) | 0.8 |
| Enterprise value to operating income (×) | 21.5 |
| Price to earnings (×) | 60.4 |
| Price to book value (×) | 4.0 |
| Free-cash-flow yield (%) | 11.0 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 3.4% of shares outstanding sold short, 2.2 days of average trading to cover, −25.6% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $285K |
| 12 monthsfrom | $0 | $1.3B |
The thesis
Legence's third-quarter beat, raised 2026 outlook, first 2027 outlook and $150 million buyback leave the shares modestly more likely than not to beat the S&P 500 over three months. The fourth-quarter report, expected around March 2027, and any new share sale by Blackstone-affiliated holders settle it.
On 12 November 2026 the company reported revenue of $1.31 billion, up 85.1% from $708.0 million a year earlier, against its own guide of $1.225–1.275 billion. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, as adjusted by the company) was $177.0 million against a guide of $150–160 million. Net income attributable to Legence was $89.6 million, or $1.15 per diluted share, against a $0.6 million loss a year earlier (Legence results release, 8-K).
The shares did not follow the results. They closed at $36.27 on 12 November 2026 and at $35.00 on 13 November 2026, the day BTIG maintained its Buy rating and lowered its price target to $60. The 3-month change is −50.0%, and the last close is 67.4% below the 52-week intraday high.
Bullish and bearish views on Legence Corp.
The bull case on Legence Corp. (LGN), in brief: results beat the guide on every line. The bear case: organic growth is slowing.
Bull case
- Results beat the guide on every line. Third-quarter revenue and adjusted EBITDA both exceeded the company's August guide. Backlog and awarded contracts were $5.90 billion at 30 September 2026, up 92.5% from $3.07 billion, with a book-to-bill ratio (new orders divided by revenue) of 1.2x (12 November 2026 release).
- Guidance rose again. Full-year 2026 revenue guidance moved to $4.87–4.91 billion from $4.70–4.80 billion, and adjusted EBITDA guidance to $610–620 million from $565–585 million. Benzinga cited a $1.225 billion analyst estimate for fourth-quarter revenue against the company's $1.26–1.30 billion guide (12 November 2026).
- A 2027 outlook now exists. The company guided 2027 revenue of $5.3–5.6 billion and adjusted EBITDA of $690–730 million (12 November 2026 release).
- Cash generation is visible. Free cash flow was $298 million over the four quarters to 30 September 2026, from operating cash flow of $372 million and capital spending of $73 million (10-Q filed 12 November 2026). Deferred revenue was $482 million, up 68.6% from a year earlier.
- A buyback is authorized. The board approved a $150 million repurchase program on 12 November 2026. It sets no share count and can be suspended at any time.
Bear case
- Organic growth is slowing. Growth excluding The Bowers Group acquisition was 39.5% in the third quarter (12 November 2026 release), against about 60% in the second quarter (13 August 2026 release). Reported growth of 85.1% leans on the acquisition.
- Margins are uneven. Adjusted gross margin was 20.3% against 21.5% a year earlier, and Engineering & Consulting revenue fell 5.8% to $199.9 million (12 November 2026 release). The filed operating margin was 12.8% in the third quarter after −0.5% in the second.
- The market rejected a beat. Benzinga's 12 November 2026 headline read "Legence Stock Trades Lower Despite Strong Q3 Earnings, Higher 2026 Outlook." BTIG lowered its price target to $60 on 13 November 2026 while keeping a Buy rating.
- Sponsor supply is a recurring overhang. Blackstone-affiliated holders sold 8,402,178 shares at $45 in December 2025 and 15,394,112 shares at $54.00 in April 2026. The shares closed at $35.00 on 13 November 2026, below both prices.
- Insiders sold into strength. The chief accounting officer sold 1,058 shares at $55.01 on 18 September 2026 and 4,196 shares at $54.06 on 15 September 2026, both under a Rule 10b5-1 plan (SEC Form 4 filings).
Price setup
The shares closed at $25.41 on 5 November 2026, the 52-week closing low. They then closed at $32.16 on 9 November 2026, $32.05 on 10 November 2026, $37.09 on 11 November 2026, $36.27 on 12 November 2026 and $35.00 on 13 November 2026. The 52-week intraday high is $107.24, set on 14 May 2026.
The last close sits below the 50-day average of $46.11 and the 200-day average of $62.62, both adjusted closes as of 13 November 2026. The 3-month change is −50.0%, measured from the $70.04 close on 17 August 2026.
The early-November rebound has given back part of its gain in the two sessions since the results. Across liquid US stocks (at least $5 million traded a day), the spread of 63-session returns had a standard deviation of 27% in 2026, so a three-month call on a stock that has halved in that span carries wide error bands.
Catalysts ahead
- ~1 March 2027 (est.): Fourth-quarter and full-year 2026 report (date not yet announced). Tests the $1.26–1.30 billion fourth-quarter revenue guide and the $4.87–4.91 billion full-year outlook, and may open another sponsor selling window.
What would change the view
A daily close below $27.91, the 6 November 2026 close, which would erase most of the rebound from the $25.41 closing low of 5 November 2026 and show the market rejecting the results. Fourth-quarter revenue below the $1.26 billion low end of the guide would also break the case.
The risks this note tracks, each with what would confirm it:
- Additional sponsor supply caps any price recovery. Confirmed by: a new secondary-offering announcement or prospectus supplement naming Blackstone-affiliated selling stockholders.
- Organic growth keeps slowing as acquisition effects fade. Confirmed by: fourth-quarter organic growth below the 39.5% reported for the third quarter, or fourth-quarter revenue below the $1.26 billion low end of the guide.
- Project margins keep narrowing as installation work scales. Confirmed by: adjusted gross margin below the 20.3% reported for the third quarter.
- Data center project spending slows and backlog conversion lags. Confirmed by: backlog and awarded contracts below the $5.90 billion reported at 30 September 2026, or book-to-bill under 1.0x.
What it trades with
Legence is a mechanical, engineering and energy-efficiency services contractor with exposure to data center, life-sciences and building-retrofit demand. It supplies installation work behind facilities that others build, so its revenue follows project spending by data center owners more than chip demand.
On 12 November 2026 the Nasdaq rose about 400 points as CoreWeave shares jumped, while Legence closed lower. On 13 November 2026 the Nasdaq fell about 100 points as Nvidia shares fell (Benzinga), and Legence also closed lower. Sponsor ownership, the Bowers acquisition and a floating-rate term loan make the shares more sensitive to share supply and short-term rates than most industrial contractors.
The evidence, claim by claim (8)
- Third-quarter 2026 revenue was $1.31 billion, up 85.1% from $708.0 million; adjusted EBITDA was $177.0 million, up 99.3% from $88.8 million. Legence third-quarter 2026 results release (8-K) · as of
- Net income attributable to Legence was $89.6 million ($1.15 per diluted share) against a $0.6 million loss in the third quarter of 2025. Legence third-quarter 2026 results release (8-K) · as of
- Backlog and awarded contracts were $5.90 billion, up 92.5% from $3.07 billion; third-quarter book-to-bill was 1.2x. Legence third-quarter 2026 results release (8-K) · as of
- Full-year 2026 guidance raised to revenue of $4.87–4.91 billion and adjusted EBITDA of $610–620 million; fourth quarter guided to revenue of $1.26–1.30 billion and adjusted EBITDA of $160–170 million. Legence third-quarter 2026 results release (8-K) · as of
- Initial 2027 guidance: revenue of $5.3–5.6 billion and adjusted EBITDA of $690–730 million. Legence third-quarter 2026 results release (8-K) · as of
- Free cash flow was $298 million over the four quarters to 30 September 2026; cash and short-term investments were $341 million against debt of $1,036 million. Legence 10-Q for the period ended 30 September 2026 · as of
- Organic growth excluding Bowers was 39.5% in the third quarter; adjusted gross margin was 20.3% against 21.5% a year earlier. Legence third-quarter 2026 results release (8-K) · as of
- BTIG maintained its Buy rating on Legence and lowered its price target to $60. BTIG note reported by Benzinga, 13 November 2026 · as of
Sources
- Legence Reports Third Quarter 2026 Financial Results · finance.yahoo.com
- Legence Stock Trades Lower Despite Strong Q3 Earnings, Higher 2026 Outlook · benzinga.com
- Legence Q3 2026 Earnings Call Transcript · benzinga.com
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