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Here's How EMCOR (EME) is Poised to Make Amid Industry Woes
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The Zacks Building Products - Heavy Construction industry is witnessing higher costs, labor woes and supply constraints. Also, its connection with the highly volatile oil and gas industry concerns the major industry players like EMCOR Group, Inc. (EME - Free Report) , Dycom Industries, Inc. (DY - Free Report) , Primoris Services Corporation (PRIM - Free Report) and Granite Construction Inc. (GVA - Free Report) .
Defying these odds, EME, a leading provider of mechanical and electrical construction, industrial and energy infrastructure and building services, has been witnessing robust demand for its services owing to strong momentum in the U.S. Mechanical and Electrical Construction segments. Solid acquisition strategies and strong liquidity are added positives.
Shares of this Zacks Rank #3 (Hold) have outperformed the industry in the past year. The outperformance can be attributable to robust earnings surprise history. EME’s bottom line topped the Zacks Consensus Estimate in 18 of the trailing 21 quarters. Earnings estimates for 2022 reflect 8.2% year-over-year growth. The company currently has a VGM Score of B, supported by both a Value Score of B and a Momentum Score of A.
Robust Demand to Offset Inflationary Woes: EMCOR’s domestic construction segments experienced strong project growth in 2021, with total Remaining Performance Obligations or RPOs having increased 22% year over year in the said period. The trend continued in first-quarter 2022 as well. The RPOs at March-end were up 24.5% from the year-ago period’s levels.
It is also facing higher demand for electrical-mechanical systems in new construction and retrofit projects. Throughout 2021 and first-quarter 2022, it experienced strong year-over-year growth in all sectors served.
Along with the U.S. Construction segment, the U.S. Mechanical Construction and Facilities Services segment also gains from most of the market served. Especially the water and wastewater, manufacturing and commercial market sector is experiencing the most significant period-over-period increases.
Although first-quarter earnings declined 9.7% year over year due to the volatile operating environment, EMCOR expects 2022 earnings per share within $7.15-$7.85 and revenues between $10.4 billion and $10.7 billion. In 2021, it reported earnings of $7.06 per share and revenues of $9.9 billion.
Inorganic Drive Combating Volatility in Oil Prices: EMCOR has a penchant for acquisitions and strategic alliances for bolstering inorganic growth as well as expanding market share. During the first quarter of 2022, it acquired a company that provides fire protection services in the Northeastern region of the United States. In 2021, the company spent $131.2 million to acquire eight companies.
In 2021, acquisitions generated incremental revenues of $196.3 million and incremental operating income of $4 million. The buyouts strengthened its overall results by adding new markets, opportunities and capabilities. The company plans to acquire more such companies in the future.
Volatility in oil prices remains a primary challenge for EMCOR’s future growth. Near-term prospects for the oil and gas industry look grim and are expected to influence other associated industries. Nonetheless, EME’s effort to expand the market and invest in businesses are generating profits in this odd situation, which will reduce the impact of this headwind.
Strong Liquidity to Overcome Untoward Situations: As of Mar 31, 2022, the company had cash and cash equivalents of $514.5 million compared with $821.3 million at the 2021-end. EMCOR ended first-quarter 2022 with a long-term debt and finance lease of $245.4 million, marking a decline from the 2021-end level of $245.5 million. Although its cash and cash equivalents were reduced over time, it is enough to meet the company’s current debt maturity of $16 million. Moreover, it has no significant debt maturity till March 2025.
A Brief Overview of Other Stocks
Dycom is benefiting from higher demand for network bandwidth and mobile broadband, extended geography, proficient program management and network planning services. Persistent impacts of a large customer program complexity, lower year-over-year revenues related to other large customers and higher fuel costs are a concern. The prospects of the Telecommunication business look good, given increased customers’ need to expand capacity and improve the performance of the existing networks and in certain instances, deploy new networks. Dycom expects considerable opportunities across a broad array of customers.
Dycom’s, currently carrying a Zacks Rank #3, earnings for fiscal 2023 are expected to grow 96.7%.
Granite Construction — a Zacks Rank #2 company — is the largest diversified infrastructure companies in the United States. The company has been banking on strategic initiatives, inorganic moves and strong bidding activity.
Estimates for GVA’s 2022 earnings are expected to climb 17.2% year over year.
Primoris — a Zacks Rank #2 company — is a specialty contractor company operating in the United States and Canada. A robust backlog level of more than $4 billion and solid contract awards in the Energy/Renewables and Utilities segment depict incredible momentum in the future despite supply chain and permitting challenges. Utility-scale solar projects continued to drive the progress of the Energy/Renewables segment.
Primoris’ earnings for 2022 are expected to grow 12%.
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Here's How EMCOR (EME) is Poised to Make Amid Industry Woes
The Zacks Building Products - Heavy Construction industry is witnessing higher costs, labor woes and supply constraints. Also, its connection with the highly volatile oil and gas industry concerns the major industry players like EMCOR Group, Inc. (EME - Free Report) , Dycom Industries, Inc. (DY - Free Report) , Primoris Services Corporation (PRIM - Free Report) and Granite Construction Inc. (GVA - Free Report) .
Defying these odds, EME, a leading provider of mechanical and electrical construction, industrial and energy infrastructure and building services, has been witnessing robust demand for its services owing to strong momentum in the U.S. Mechanical and Electrical Construction segments. Solid acquisition strategies and strong liquidity are added positives.
Shares of this Zacks Rank #3 (Hold) have outperformed the industry in the past year. The outperformance can be attributable to robust earnings surprise history. EME’s bottom line topped the Zacks Consensus Estimate in 18 of the trailing 21 quarters. Earnings estimates for 2022 reflect 8.2% year-over-year growth. The company currently has a VGM Score of B, supported by both a Value Score of B and a Momentum Score of A.
Image Source: Zacks Investment Research
Let’s delve deeper into the factors substantiating its growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Robust Demand to Offset Inflationary Woes: EMCOR’s domestic construction segments experienced strong project growth in 2021, with total Remaining Performance Obligations or RPOs having increased 22% year over year in the said period. The trend continued in first-quarter 2022 as well. The RPOs at March-end were up 24.5% from the year-ago period’s levels.
It is also facing higher demand for electrical-mechanical systems in new construction and retrofit projects. Throughout 2021 and first-quarter 2022, it experienced strong year-over-year growth in all sectors served.
Along with the U.S. Construction segment, the U.S. Mechanical Construction and Facilities Services segment also gains from most of the market served. Especially the water and wastewater, manufacturing and commercial market sector is experiencing the most significant period-over-period increases.
Although first-quarter earnings declined 9.7% year over year due to the volatile operating environment, EMCOR expects 2022 earnings per share within $7.15-$7.85 and revenues between $10.4 billion and $10.7 billion. In 2021, it reported earnings of $7.06 per share and revenues of $9.9 billion.
Inorganic Drive Combating Volatility in Oil Prices: EMCOR has a penchant for acquisitions and strategic alliances for bolstering inorganic growth as well as expanding market share. During the first quarter of 2022, it acquired a company that provides fire protection services in the Northeastern region of the United States. In 2021, the company spent $131.2 million to acquire eight companies.
In 2021, acquisitions generated incremental revenues of $196.3 million and incremental operating income of $4 million. The buyouts strengthened its overall results by adding new markets, opportunities and capabilities. The company plans to acquire more such companies in the future.
Volatility in oil prices remains a primary challenge for EMCOR’s future growth. Near-term prospects for the oil and gas industry look grim and are expected to influence other associated industries. Nonetheless, EME’s effort to expand the market and invest in businesses are generating profits in this odd situation, which will reduce the impact of this headwind.
Strong Liquidity to Overcome Untoward Situations: As of Mar 31, 2022, the company had cash and cash equivalents of $514.5 million compared with $821.3 million at the 2021-end. EMCOR ended first-quarter 2022 with a long-term debt and finance lease of $245.4 million, marking a decline from the 2021-end level of $245.5 million. Although its cash and cash equivalents were reduced over time, it is enough to meet the company’s current debt maturity of $16 million. Moreover, it has no significant debt maturity till March 2025.
A Brief Overview of Other Stocks
Dycom is benefiting from higher demand for network bandwidth and mobile broadband, extended geography, proficient program management and network planning services. Persistent impacts of a large customer program complexity, lower year-over-year revenues related to other large customers and higher fuel costs are a concern. The prospects of the Telecommunication business look good, given increased customers’ need to expand capacity and improve the performance of the existing networks and in certain instances, deploy new networks. Dycom expects considerable opportunities across a broad array of customers.
Dycom’s, currently carrying a Zacks Rank #3, earnings for fiscal 2023 are expected to grow 96.7%.
Granite Construction — a Zacks Rank #2 company — is the largest diversified infrastructure companies in the United States. The company has been banking on strategic initiatives, inorganic moves and strong bidding activity.
Estimates for GVA’s 2022 earnings are expected to climb 17.2% year over year.
Primoris — a Zacks Rank #2 company — is a specialty contractor company operating in the United States and Canada. A robust backlog level of more than $4 billion and solid contract awards in the Energy/Renewables and Utilities segment depict incredible momentum in the future despite supply chain and permitting challenges. Utility-scale solar projects continued to drive the progress of the Energy/Renewables segment.
Primoris’ earnings for 2022 are expected to grow 12%.