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Solid Segmental Performance to Aid EMCOR's (EME) Q1 Earnings

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EMCOR Group, Inc. EME is slated to report first-quarter 2020 results on Apr 30, before the opening bell.

In the last reported quarter, adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate by 2.7% and 2.1%. Further, on a year-over-year basis, adjusted earnings improved 11.6%, driven by strong revenue growth across the board and disciplined project execution. Revenues were up 7.8% year over year.

This mechanical and electrical construction service provider surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average surprise of 10.5%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased 2.3% to $1.32 per share over the past seven days. The figure indicates a 3.1% increase from the year-ago earnings of $1.28 per share. The consensus mark for revenues is $2.3 billion, suggesting a 6.5% year-over-year improvement.

EMCOR Group, Inc. Price and EPS Surprise

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

EMCOR Group, Inc. price-eps-surprise | EMCOR Group, Inc. Quote

Factors to Note

Although the coronavirus outbreak affected the company’s operations in some areas in the latter part of the first quarter (precisely March), strong demand across geographies and end markets served, as well as disciplined project execution are likely to reflect on EMCOR’s first-quarter results. It has been witnessing higher project activity in the U.S. Construction segment, which comprises Mechanical and Electrical Construction units.

Also, EMCOR has been experiencing increased bidding opportunities in the commercial sector. Its focus on acquiring small private firms with proven management and expansion potential is expected to have aided revenue growth.

That said, it has been experiencing certain headwinds from the U.S. mechanical construction and facilities services segment related to the mix of work within the manufacturing market. This includes projects that are in the earlier stages of completion and typically carry lower gross profit margins. Also, the absence of significant construction projects within the transportation market added to the woes.

Strong Preliminary Results

Earlier in last week, EMCOR announced preliminary results for the first quarter, wherein it expects to generate revenues of $2.3 billion, indicating a 6.5% year-over-year increase. The potential increase can be attributable to strength across the business, led by double-digit growth in both U.S. mechanical construction and industrial services segments.

Additionally, it expects earnings to be $1.35 per share, suggesting a 5.5% increase from the year-ago period.

Meanwhile, the company stated that it has been bidding and booking work amid the challenging environment. It is currently operating at 70-80% of its capacity. However, in some areas where the company has been designated as essential for the economy, it is working at or near full capacity.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for EMCOR this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here as you will see below.

Earnings ESP: The Earnings ESP for the company is 0.00%. 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 #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Masco Corporation MAS has an Earnings ESP of +10.73% and carries a Zacks Rank #3.

frontdoor, inc. FTDR has an Earnings ESP of +9.76% and holds a Zacks Rank #3.

Rayonier Inc. RYN has an Earnings ESP of +5.00% and carries a Zacks Rank #3.

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