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EMCOR (EME) to Report Q4 Earnings: What's in the Offing?

Zacks Equity Research

EMCOR Group, Inc. EME is slated to report fourth-quarter 2018 results on Feb 21, before the opening bell.

This mechanical and electrical construction service provider surpassed the Zacks Consensus Estimate in the last reported quarter. Adjusted earnings of $1.36 per share and revenues of $2.05 billion surpassed estimates by 11.5% and 4.7%, respectively.

EMCOR Group, Inc. Price and EPS Surprise

 

EMCOR Group, Inc. Price and EPS Surprise | EMCOR Group, Inc. Quote

Further, on a year-over-year basis, adjusted earnings improved 24.8%, driven by continued strength in its U.S. Industrial segment, along with robust performance of the U.K. Building Services segment. Revenues also moved up 8.5% year over year.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

For the to-be-reported quarter, EMCOR’s earnings are pegged at $1.36 per share, which marks an increase of 20.4% from the year-ago period. Revenues are estimated to be $2.05 billion, reflecting growth of 2.1% from the year-ago quarter.

Factors at Play

EMCOR’s fourth-quarter results are likely to benefit from accretive acquisitions, and higher project activity within health care, commercial and transportation markets. The company’s prospects in non-residential markets remain quite impressive, which are likely to help it secure more mid-sized large projects. It is also expanding the ambit of the Industrial business line beyond traditional shop-related operations to explore other profitable works in areas like food processing and power. Overall, robust construction activity, mainly in non-residential markets, is likely to boost profitability.

Segment Discussion

The Zacks Consensus Estimate for the United States Building Services segment’s revenues (contributing 23.1% to total revenues) is pegged at $456 million, indicating an increase from $238 million in the year-ago period.

The company’s two major segments, namely United States Electrical Construction and Facilities Services, and United States Mechanical Construction and Facilities Services have continued to display significant strength in the past three quarters. The upside was primarily driven by higher project activity within health care, commercial and transportation markets.

The consensus estimate for the United States Electrical Construction and Facilities Services segment’s revenues (adding 23.8% to total revenues) is pegged at $496 million, indicating an increase from $479 million in the year-ago period. Further, estimates for the United States Mechanical Construction and Facilities Services segment’s revenues (37.7% of total revenues in the third quarter) are pegged at $797 million, indicating an increase from $791 million in the year-ago period.

EMCOR is expanding the domain of its United States Industrial Services business line beyond traditional shop-related operations to explore other profitable works in areas like food processing and power. The company remains positive about its future prospects to secure more mid-sized large projects in 2018. Moreover, it remains optimistic about the commercial sector going into 2019.

Meanwhile, the Industrial segment’s revenues (accounting for 10.5% of revenues) are estimated to reach $222 million, reflecting an increase from $207 million in the year-ago period.

Notably, EMCOR’s United Kingdom Building Services segment reported 17.1% organic revenue growth in the third quarter of 2018 on the back of new customer wins and expansion of existing relationships. Its commercial, institutional, and water and wastewater markets have been performing well of late, given new contract wins. Moreover, the consensus mark for the said segment’s revenues (5.4% of total revenues in the third quarter) is pegged at $101 million, reflecting an increase from $97 million a year ago.

What Our Model Indicates

Our proven model does not suggest a beat for EMCOR in the quarter to be reported. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates.

Earnings ESP: The Earnings ESP for the company is -0.74% as the Most Accurate Estimate is pegged at $1.35 while the Zacks Consensus Estimate is pinned at $1.36. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: EMCOR currently carries a Zacks Rank #2.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some other construction companies that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming releases:

Toll Brothers, Inc. TOL has an Earnings ESP of +1.91% and a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Winnebago Industries, Inc. WGO has an Earnings ESP of +10.80% and a Zacks Rank #3.

Forterra, Inc. FRTA has an Earnings ESP of +8.99% and a Zacks Rank #2.

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