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EMCOR (EME) Beats on Q1 Earnings & Revenues, Lifts 2021 View

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EMCOR Group Inc. EME reported better-than-expected results for first-quarter 2021. Its earnings and revenues surpassed the Zacks Consensus Estimate as well as increased from the prior-year levels. While earnings beat the consensus estimate in six of the trailing seven quarters, revenues outpaced the same for three consecutive quarters.

The results were mainly driven by solid execution in the U.S. Mechanical Construction segment and disciplined cost control amid the COVID-19 pandemic.

Following the earnings announcement, shares of the company moved up 0.9% during the trading session on Apr 29.

Earnings & Revenues

EMCOR reported adjusted earnings per share of $1.54 per share, which topped the consensus mark of $1.17 by 31.6% and increased 14.1% from the year-ago level.

Revenues totaled $2,304 million, which beat the consensus mark by 5.6%. Revenues grew just 0.2% year over year, mainly due to tepid performance of the U.S. Industrial Services segment.

EMCOR Group, Inc. Price, Consensus and EPS Surprise

EMCOR Group, Inc. Price, Consensus and EPS Surprise
EMCOR Group, Inc. Price, Consensus and EPS Surprise

EMCOR Group, Inc. price-consensus-eps-surprise-chart | EMCOR Group, Inc. Quote

Segment Details

For first-quarter 2021, the U.S. Construction segment’s revenues increased 5% year over year to $1,360.1 million. Segment operating margin improved 110 basis points (bps) year over year to 7.7%. The upside was primarily driven by solid performance of its U.S. Mechanical Construction segment in commercial, healthcare and institutional markets.

Within the U.S. Construction umbrella, the U.S. Electrical Construction and facilities services segment revenues declined 1.2% year over year to $456.2 million. Operating margin, however, expanded 10 bps year over year. The U.S. Mechanical Construction and Facilities Services segment revenues grew 8.4% from the prior-year quarter to $903.4 million. Its operating margin improved 180 bps.

For the quarter, revenues in the U.S. Building Services segment grew 10.8% year over year to $581.8 million. The upside was primarily driven by commercial site-based and mobile mechanical services businesses. Meanwhile, operating margin of 5% was up 100 bps from the prior-year level.

The U.S. Industrial Services unit’s first-quarter revenues plunged 35.3% year over year to $235.4 million. The segment was significantly impacted by the Texas Freeze, which, in many cases, pushed the company’s turnaround schedule to second-quarter 2021. This business reported operating margin of (1%) against 4.2% a year ago due to the above-mentioned headwind.

The U.K. Building Services segment’s revenues for the quarter increased 12.8% year over year to $126.7 million. The upside was backed by strong resumption in project work during the quarter as the U.K. market approaches the conclusion of COVID-19 lockdown mandates. The business reported operating margin of 7.4%, up 230 bps from the prior-year level.

Operating Highlights

Selling, general and administrative expenses — as a percentage of revenues — were 9.7%, which decreased 20 bps from the prior-year quarter.

Adjusted operating margin of 5.1% was up 50 bps, supported by strong cost-containment measures.

Liquidity & Cash Flow

As of Mar 31, 2021, the company had cash and cash equivalents of $758.8 million compared with $902.9 million at 2020-end. Long-term debt and finance lease obligations totaled $259.7 million, which remained unchanged from 2020-end.

In the first quarter, EMCOR used $89 million cash for operating activities compared with $78.8 million in the year-ago period.

2021 Guidance Raised

Buoyed by favorable project mix and the assumption that the current market conditions will improve, EMCOR lifted its 2021earnings guidance.

The company now expects earnings within $6.35-$6.75 versus $6.20-$6.70 per share projected earlier. The Zacks Consensus Estimate for the same is currently pegged at $6.43 per share.

It reaffirmed its revenue guidance for 2021 in the range of $9.2-$9.4 billion. The consensus estimate for 2021 revenues is currently pegged at $9.24 billion.

Zacks Rank

EMCOR — which shares space with Dycom Industries, Inc. DY, MasTec, Inc. MTZ and Great Lakes Dredge & Dock Corporation GLDD in the Zacks Building Products - Heavy Construction industry — currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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