EMCOR (EME) Q4 Earnings & Revenues Beat, 2020 View Strong
EMCOR Group Inc. EME reported solid results in fourth-quarter 2019, wherein the top and bottom lines surpassed the respective Zacks Consensus Estimate, and improved year over year. The solid performance was mainly driven by strong project execution across the business and cost discipline.
The company reported adjusted earnings of $1.54 per share, which topped the consensus mark of $1.50 by 2.7% and increased 11.6% from the year-ago quarter. The improvement was driven by strong revenue growth across the board and disciplined project execution.
Revenues during the quarter totaled $2.4 billion, surpassing the consensus mark of $2.36 billion by 2.1%. Also, the reported figure grew 7.8% year over year, driven by solid segmental growth.
EMCOR Group, Inc. Price, Consensus and EPS Surprise
EMCOR Group, Inc. price-consensus-eps-surprise-chart | EMCOR Group, Inc. Quote
Segment Details
The U.S. Construction segment recorded revenue improvement of 9.9% year over year, supported by project wins across key market sectors and geographies.
Within U.S. Construction, the U.S. Electrical Construction and facilities services segment reported revenue growth of 5.7% year over year. Also, the U.S. Mechanical Construction and facilities services segment reported revenue growth of 12.7% from a year ago.
Revenues in the U.S. Building Services segment maintained robust momentum during the quarter, as is evident from double-digit revenue growth of 10.9%. The solid improvement was driven by strong mechanical services division and a number of large contract wins in the commercial site-based services division. The U.S. Industrial Services unit’s revenues, however, declined 4.3% year over year.
The U.K. Building Services segment’s revenues increased 3.6% year over year.
Operating Highlights
Selling, general and administrative expenses — as a percentage of revenues — were 10%, up 10 basis points (bps) from the prior-year period.
Non-GAAP operating income (excluding impairment loss on identifiable intangible assets) totaled $122.9 million during the quarter, 8.1% higher than the prior-year period, supported by its focus on cost discipline and execution. Yet, adjusted operating margin of 5.1% was almost in line with the prior-year period.
Liquidity & Cash Flow
As of Dec 31, 2019, the company had cash and cash equivalents of $358.8 million compared with $363.9 million at 2018-end. Long-term debt and finance lease obligations totaled $244.1 million, down from $254.8 million recorded on Dec 31, 2018.
In 2019, EMCOR provided $355.7 million cash to operating activities compared with $271 million a year ago.
2019 Highlights
Adjusted earnings in the full year were recorded at $5.75 per share, up 17.1% year over year. The reported figure surpassed the consensus estimate of $5.72 by 0.5%. Revenues also grew 12.8% from the year-ago period, backed by 9.3% organic growth. The uptick was mainly due to broad-based improvement across the business, underscored by double-digit growth in each of the domestic segments.
2020 Guidance
Buoyed by favorable project mix and the assumption that the current market conditions will continue, EMCOR provided strong earnings as well as revenue guidance.
It projects revenues for 2020 in the range of $9.5-$9.7 billion. The consensus estimate for 2020 revenues is currently pegged at $9.67 billion. The company expects earnings within $5.60-$6.30 per share compared with the consensus mark of $5.94.
Importantly, it anticipates robust project pipeline and sustained growth in the non-residential construction market in 2020.
On Feb 15, 2020, EMCOR found a RYUK ransomware attack infecting some of its systems with malware. However, as a precaution, it has promptly shut down certain IT systems to help detect the problem. Notably, the company’s full-year 2020 guidance reflects some financial impact of the ransomware attack.
Zacks Rank & Peer Release
EMCOR — which shares space with MasTec, Inc. MTZ and Great Lakes Dredge & Dock Corporation GLDD in the Zacks Building Products - Heavy Construction industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dycom Industries Inc. DY reported lackluster fourth-quarter fiscal 2020 (ended Jan 25, 2020) results. Its bottom line not only missed the Zacks Consensus Estimate but also declined from the year-ago level. Dycom highlighted that adverse weather, seasonal effects, challenges surrounding a large customer program, and a slow start at a specific customer in rolling out its new system weighed on margins in the quarter. The company provided weak fiscal first-quarter guidance.
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