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In the last reported quarter, the company posted stellar earnings on the back of operational excellence despite inflationary pressure. Its adjusted earnings per share (EPS) handily surpassed analysts’ expectations by 42.8% and increased 79.7% from the year-ago quarter. Revenues also grew 18.7% year over year due to a continued strong mix and pipeline of projects in large and growing market sectors with long-term secular trends, including high-tech and traditional manufacturing and network & communications.
On a further encouraging note, this specialty contracting services provider surpassed earnings estimates in the trailing four quarters with an average of 32%. You can see the historical figures in the chart below.
Image Source: Zacks Investment Research
Earnings & Revenue Expectations
The Zacks Consensus Estimate for EME’s second-quarter EPS has moved up to $3.68 from $3.50 in the past seven days. The estimated figure indicates a 24.8% increase on a year-over-year basis.
Image Source: Zacks Investment Research
The consensus estimate for revenues is pegged at $3.54 billion, indicating a 16.4% year-over-year rise.
What the Zacks Model Says
Our proven model predicts an earnings beat for EMCOR this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case here.
Earnings ESP: EMCOR currently has an Earnings ESP of +4.76%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Despite persistent inflationary and uncertain economic conditions, EMCOR’s revenues and earnings are expected to have increased in the second quarter of 2024. The company has been benefiting from increased project flows from high-tech manufacturing and network and communications market sectors due to solid demand for semiconductor and data center construction projects.
The company is also improving on strength in the combined U.S. Construction segments and the U.S. Building Services segment, backed by solid end-market demand as well as top-tier execution initiatives. These tailwinds are likely to have aided its top line in the to-be-reported quarter.
However, increased material and labor woes are likely to have impacted the company’s performance in the second quarter. Potential downturns in global energy markets and supply-chain disruption due to international conflicts could also impact EMCOR's profitability in the quarter-to-be reported.
Price Performance & Valuation
EME’s shares have gained impressively in the year-to-date period (YTD) period. The stock has surged 74.4% in YTD, outperforming the Zacks Building Products - Heavy Construction industry’s 54.1% growth and other players like Dycom Industries, Inc. (DY - Free Report) , MasTec, Inc. (MTZ - Free Report) and Great Lakes Dredge & Dock Corporation (GLDD - Free Report) , which surged 57.2%, 44% and 23.4%, respectively.
Image Source: Zacks Investment Research
From the valuation point of view, the stock is trading at a premium. EMCOR’s forward 12-month price-to-earnings ratio currently stands at 22.21X, higher than the industry’s average of 20.39X and above its five-year median of 19.52X.
On the contrary, it provides solid investment returns compared to the industry’s average, as reflected in its current trailing 12-month ROE of 30.4% versus the industry’s 11.8%.
Investment Thoughts
EMCOR, a Fortune 500 company with a market cap nearing $17 billion, has built a reputation for its strategic focus and diverse offerings. Specializing in mechanical and electrical construction, industrial and energy infrastructure, and building services, EMCOR has established itself as a leader in these specialized sectors. The company's investment in expanding prefabrication and VDC technologies, including BIM, automation, and robotics, underscores its commitment to innovation. These technologies enable EMCOR to design, build, and coordinate complex projects efficiently.
With rising trends in energy efficiency and sustainability, EMCOR is well-positioned among its peers. The Mechanical Services division, part of the Building Services segment, is crucial to the company's success, contributing nearly 65% of total revenues through project and retrofit design, installation, repair, and maintenance services.
Despite these strengths, EMCOR's shares have declined 1.3% in the past month against the industry's growth of 2.1%. This drop is attributed to potential challenges in the global energy markets and a higher interest rate environment. Additionally, supply chain disruptions, energy price fluctuations, and global conflicts remain concerns. Current shareholders are advised to hold their positions, while potential investors might consider waiting for a more favorable entry point, given the stock's high valuation.
Image: Bigstock
Should You Buy, Sell, or Hold EMCOR (EME) Before Q2 Earnings?
EMCOR Group, Inc. (EME - Free Report) is scheduled to report second-quarter 2024 results on Jul 25, before the opening bell.
In the last reported quarter, the company posted stellar earnings on the back of operational excellence despite inflationary pressure. Its adjusted earnings per share (EPS) handily surpassed analysts’ expectations by 42.8% and increased 79.7% from the year-ago quarter. Revenues also grew 18.7% year over year due to a continued strong mix and pipeline of projects in large and growing market sectors with long-term secular trends, including high-tech and traditional manufacturing and network & communications.
On a further encouraging note, this specialty contracting services provider surpassed earnings estimates in the trailing four quarters with an average of 32%. You can see the historical figures in the chart below.
Image Source: Zacks Investment Research
Earnings & Revenue Expectations
The Zacks Consensus Estimate for EME’s second-quarter EPS has moved up to $3.68 from $3.50 in the past seven days. The estimated figure indicates a 24.8% increase on a year-over-year basis.
Image Source: Zacks Investment Research
The consensus estimate for revenues is pegged at $3.54 billion, indicating a 16.4% year-over-year rise.
What the Zacks Model Says
Our proven model predicts an earnings beat for EMCOR this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case here.
Earnings ESP: EMCOR currently has an Earnings ESP of +4.76%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: EME currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Influencing Q2 Performance
Despite persistent inflationary and uncertain economic conditions, EMCOR’s revenues and earnings are expected to have increased in the second quarter of 2024. The company has been benefiting from increased project flows from high-tech manufacturing and network and communications market sectors due to solid demand for semiconductor and data center construction projects.
The company is also improving on strength in the combined U.S. Construction segments and the U.S. Building Services segment, backed by solid end-market demand as well as top-tier execution initiatives. These tailwinds are likely to have aided its top line in the to-be-reported quarter.
However, increased material and labor woes are likely to have impacted the company’s performance in the second quarter. Potential downturns in global energy markets and supply-chain disruption due to international conflicts could also impact EMCOR's profitability in the quarter-to-be reported.
Price Performance & Valuation
EME’s shares have gained impressively in the year-to-date period (YTD) period. The stock has surged 74.4% in YTD, outperforming the Zacks Building Products - Heavy Construction industry’s 54.1% growth and other players like Dycom Industries, Inc. (DY - Free Report) , MasTec, Inc. (MTZ - Free Report) and Great Lakes Dredge & Dock Corporation (GLDD - Free Report) , which surged 57.2%, 44% and 23.4%, respectively.
Image Source: Zacks Investment Research
From the valuation point of view, the stock is trading at a premium. EMCOR’s forward 12-month price-to-earnings ratio currently stands at 22.21X, higher than the industry’s average of 20.39X and above its five-year median of 19.52X.
On the contrary, it provides solid investment returns compared to the industry’s average, as reflected in its current trailing 12-month ROE of 30.4% versus the industry’s 11.8%.
Investment Thoughts
EMCOR, a Fortune 500 company with a market cap nearing $17 billion, has built a reputation for its strategic focus and diverse offerings. Specializing in mechanical and electrical construction, industrial and energy infrastructure, and building services, EMCOR has established itself as a leader in these specialized sectors. The company's investment in expanding prefabrication and VDC technologies, including BIM, automation, and robotics, underscores its commitment to innovation. These technologies enable EMCOR to design, build, and coordinate complex projects efficiently.
With rising trends in energy efficiency and sustainability, EMCOR is well-positioned among its peers. The Mechanical Services division, part of the Building Services segment, is crucial to the company's success, contributing nearly 65% of total revenues through project and retrofit design, installation, repair, and maintenance services.
Despite these strengths, EMCOR's shares have declined 1.3% in the past month against the industry's growth of 2.1%. This drop is attributed to potential challenges in the global energy markets and a higher interest rate environment. Additionally, supply chain disruptions, energy price fluctuations, and global conflicts remain concerns. Current shareholders are advised to hold their positions, while potential investors might consider waiting for a more favorable entry point, given the stock's high valuation.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.