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EMCOR Group Upgraded to Strong Buy

Zacks Equity Research

On Jul 1, Zacks Investment Research upgraded EMCOR Group, Inc. (EME) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

EMCOR’s business has been benefiting from its strong fundamentals and recent contract wins.  The company reported strong first-quarter fiscal 2014 results with growth in both earnings and revenues. Moreover, this leading construction and manufacturing company delivered positive earnings surprises in 2 of the last 4 quarters with an average beat of 0.31%.

The ongoing recovery in the non-residential construction market across the globe, especially in the U.S. is also benefiting the company’s business.

Recently, on Jun 27, the company’s subsidiary - EMCOR Government Services (:EGS) won a contract for medical maintenance in Fort Belvoir. EGS will be providing operation, maintenance and systems repair services to the Virginia based Fort Belvoir Community Hospital and the Northern Region Medical Command building in Fort Belvoir. The news inspired investor’s confidence as the company’s shares gained 1.13%.

On May 1, EMCOR reported first-quarter 2014 results with adjusted earnings of 64 cents per share easily surpassing the Zacks Consensus Estimate of 53 cents. Earnings also increased 28% compared with the year-ago earnings of 50 cents.

The company’s diversified business along with the robust performance of its U.S. electrical construction, U.S. Mechanical Construction, U.S. Building Services and U.S. Industrial Services segments were some of the key growth drivers. In the reported quarter, the company also benefited from the increase in snow removal projects owing to the harsh winter this time.

EMCOR Group expects healthy growth in 2014 driven by its recent acquisitions, strong cash and balance sheet position and the scope for recovery of non-residential construction markets. Along with the earnings release, management reaffirmed the guidance for 2014 revenues to be around $6.8 billion. The company also increased its earnings per share guidance to a band of $2.45–$2.70 per share from the previous range of $2.40– $2.70 per share.

The Zacks Consensus Estimate for earnings per share for 2014 is currently pegged at $2.64 reflecting year-over-year growth of 19.1%. The expected long-term earnings growth rate for the stock is 15.0%.

Other Stocks to Consider

Some other stocks in the sector include Sterling Construction Co. Inc. (STRL), Tutor Perini Corporation (TPC) and Primoris Services Corporation (PRIM). While Sterling Construction and Tutor Perini both have the same Zacks Rank as EMCOR, Primoris Services carries a Zacks Rank #2 (Buy).

Read the Full Research Report on EME
Read the Full Research Report on PRIM
Read the Full Research Report on TPC
Read the Full Research Report on STRL

Zacks Investment Research