A month has gone by since the last earnings report for Emcor Group (EME). Shares have lost about 2.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Emcor Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
EMCOR's (EME) Q2 Earnings & Revenues Beat Estimates, View Up
EMCOR Group Inc. reported better-than-expected results in second-quarter 2019. Both the top and bottom lines not only surpassed the respective Zacks Consensus Estimate but also increased year over year. The solid performance was mainly driven by 15.2% organic growth and double-digit revenue improvement in each of its domestic segments.
Notably, the company raised its full-year 2019 guidance for revenues and earnings.
The company reported adjusted earnings of $1.49 per share, beating the consensus mark of $1.30 by 14.6%. Also, the reported figure increased 23.1% from the year-ago quarter. The improvement was driven by strong revenue growth across the board and disciplined project execution.
Revenues during the quarter came in at $2.32 billion, which surpassed the consensus mark of $2.09 billion by 11.3% and grew 19% year over year. The company experienced solid demand across geographies and end-markets served.
The U.S. Construction segment generated revenue and operating income growth of 15.7% and 4.7% year over year, respectively.
The U.S. Electrical Construction segment’s revenues increased 13.7% year over year. Notably, the reported growth was organic. The U.S. Mechanical Construction segment reported revenue growth of 9.4%, organically, from a year ago. Markedly, acquisitions added 18.7% to the said growth.
Revenues in the U.S. Building Services segment maintained robust momentum on double-digit revenue growth and operating income. The solid improvement was driven by strong demand in mechanical and energy services businesses, and continued execution of several large contracts within the commercial site-based business.
The U.S. Industrial Services unit posted an impressive revenue growth of 60.6% year over year, given field services operations. The U.K. Building Services segment registered 6.7% year-over-year revenue improvement and 19% operating income growth, backed by strong demand.
Selling, general and administrative expenses — as a percentage of revenues — were 9.7%, in line with the prior-year period.
Non-GAAP operating income (excluding impairment loss on identifiable intangible assets) totaled $120 million during the quarter, higher than $100.6 million in the prior-year period. Adjusted operating margin was 5.2%, up 10 basis points (bps) from the prior-year figure of 5.1%. The upside was mainly driven by exceptional execution of cost-control measures.
Liquidity & Cash Flow
As of Jun 30, 2019, the company had cash and cash equivalents of $213.4 million compared with $363.9 million at 2018-end. Long-term debt and finance lease obligations totaled $251.4 million, down from $254.8 million recorded on Dec 31, 2018.
In the first six months of 2019, EMCOR used $42.2 million cash in operating activities compared with $32.7 million in the comparable prior-year period.
2019 Guidance Raised
Buoyed by solid first-half performance, favorable project mix and the assumption of continuation of current market conditions, EMCOR lifted its view for full-year 2019 earnings as well as revenues.
EMCOR projects revenues between $8.8 billion and $8.9 billion, up from the prior guided range of $8.5-$8.6 billion for the year. The company now expects earnings within $5.50-$5.75 a share, up from the prior expectation of 5.00-$5.50.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
At this time, Emcor Group has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Emcor Group has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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