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EMCOR's (EME) Beats Q2 Earnings Estimates, Hikes Dividend

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EMCOR Group, Inc. EME reported solid results for second-quarter 2022. The top and bottom lines surpassed the Zacks Consensus Estimate and increased year over year.

The company’s management approved a 15.4% hike in its regular quarterly dividend to 15 cents, payable on Oct 31 to stockholders of record as of Oct 18, 2022. Also, it authorized a new share repurchase program to repurchase up to an additional $500 million of its outstanding common stock. Shares of the company jumped 5.33% on Jul 28.

Tony Guzzi, chairman, president and CEO of EMCOR, said, “Heading into the back half of the year, we are pleased with our results to-date and are well positioned to build on our momentum despite ongoing supply chain challenges, potential COVID-related disruptions, and an uncertain macro-environment. Our confidence is based on our expectations for strong project demand across key market sectors, favorable SG&A leverage, and a more normalized fall turnaround season for our U.S. Industrial Services segment.”

Earnings & Revenues Discussion

The company reported adjusted earnings of $1.99 per share, surpassing the consensus mark of $1.68 by 18.5% and increasing 11.8% from the year-ago quarter’s figure of $1.78.

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

 

Revenues totaled $2.71 billion, surpassing the consensus mark of $2.62 billion by 3.3% and rising 11.1% year over year. Organic revenues were up 9.7%, driven by double-digit growth across the U.S. Construction, U.S. Building Services and U.S. Industrial Services segments.

Segment Details

The U.S. Construction segment revenues were up 11.6% year over year to $1.63 billion. Segment operating margin fell 130 basis points (bps) year over year to 6.9%. The upside was driven by strong demand for specialty contracting construction services across many market sectors.

Within the U.S. Construction umbrella, the U.S. Electrical Construction and Facilities Services segment’s revenues increased 14.6% year over year to $564.1 million. Operating income fell 18.4% and margin contracted 250 bps year over year. The U.S. Mechanical Construction and Facilities Services segment’s revenues rose 10.1% from a year ago to $1,066.3 million. Its operating income inched up 0.3%, but its margin contracted 50 bps year over year.

Revenues in the U.S. Building Services segment rose 10.8% from the prior-year quarter’s levels to $677.8 million, driven by solid growth in the HVAC repair service and commercial site-based services division. Operating income increased 17.3% year over year and margin improved 30 bps.

The U.S. Industrial Services unit’s revenues increased 21% year over year to $284.5 million, backed by extraordinarily high utilization rates from its downstream customers. Operating income surged to $6.5 million against an operating loss of $0.2 million reported in second-quarter 2021.The operating margin was 2.3% against a negative 0.1% a year ago.

The U.K. Building Services segment’s revenues declined 11.8% from the year-ago quarter to $114.5 million. Operating income fell 9%, but the operating margin rose 20 bps year over year.

Operating Highlights

Gross margins contracted 130 bps to 14.1% for the quarter. Selling, general and administrative expenses — as a percentage of revenues — of 9.1% improved 90 bps from the prior-year quarter’s levels.

Operating income in the quarter amounted to $137.6 million, up 3.1% year over year. The operating margin of 5.1% contracted 40 bps from the prior-year quarter’s levels due to ongoing supply chain disruption.

Liquidity & Cash Flow

As of Jun 30, 2022, EME had cash and cash equivalents of $262.4 million compared with $821.3 million at the 2021-end. Long-term debt and finance lease obligations totaled $245 million, marking a slight decline from the 2021-end level of $245.45 million.

For the first six months of 2022, net cash used in operating activities was $18.85 million compared with $6.97 million in the year-ago period.

The remaining performance obligations at June-end were $6.46 billion, up 26.5% from $5.11 billion at June 2021-end.

2022 Guidance Updated

EMCOR now expects earnings per share within $7.30-$7.80, narrower from the $7.15-$7.85 projected earlier. It anticipates revenues of approximately $10.8 billion (up from prior projection of $10.4-$10.7 billion). The consensus estimate for earnings is currently pegged at $7.66 per share and that for revenues is currently estimated at $10.72 billion.

Zacks Rank & Recent Construction Releases

EMCOR currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

United Rentals, Inc. URI posted better-than-expected second-quarter 2022 results. Better fleet productivity on broad-based rental demand in construction and industrial verticals, higher total and rental revenues along with stronger pricing helped the company to boost profit.

URI also lifted its full-year guidance for total revenues, adjusted EBITDA and free cash flow, given broad-based end-market activity, contractor backlogs, customer sentiment and our visibility through the balance of the year.

Martin Marietta Materials, Inc. MLM reported impressive second-quarter 2022 results. Earnings and revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis, backed by improved pricing across businesses and higher demand.

Despite increased inflationary pressure from rising input costs and a challenging macroeconomic and geopolitical environment, solid execution of its strategic business plan and resilient aggregates-led business drove the result.

Masco Corporation MAS reported results for second-quarter 2022, with earnings and revenues missing the Zacks Consensus Estimate after beating it in the preceding quarter.

Masco’s top line increased, whereas the bottom line remained flat year over year.


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