A month has gone by since the last earnings report for Emcor Group (EME Quick QuoteEME - Free Report) . Shares have added about 11.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Emcor Group due for a pullback? 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 Q4 Earnings and Revenues Beat Estimates

EMCOR reported impressive fourth-quarter 2023 results, with earnings and revenues surpassing the Zacks Consensus Estimate and increasing year over year.

For EMCOR, 2023 marked an exceptional year. The company registered record-breaking results across virtually every metric. Despite facing challenges in the operating environment, the company demonstrated resilience and adaptability. Revenues and operating income saw remarkable growth, driven by success in key sectors such as high-tech manufacturing, network and communications, manufacturing and industrial and healthcare.

EMCOR's growth strategy positions it for long-term success, with organic and inorganic initiatives driving record performance. The company believes it is well-positioned in the right market sectors and geographies to secure complex projects and deliver value to customers. Its record remaining performance obligations offer solid visibility into 2024 despite potential macroeconomic challenges and other factors affecting performance and execution.

Earnings & Revenue Discussion

The company reported adjusted earnings of $4.47 per share, surpassing the Zacks Consensus Estimate of adjusted earnings of $3.51 per share by 27.4%. The metric also increased 70% from the year-ago quarter’s figure of $2.63 per share.

Revenues were $3.44 billion, surpassing the consensus mark of $3.26 billion by 5.6% and increasing 16.6% year over year. Strength across the segments and market helped the company achieve 16.2% higher organic revenues.

Segment Details

EMCOR currently operates in four reportable segments, which are U.S. Construction Services (Electrical and Mechanical Construction and Facilities Services), U.S. Building Services, U.S. Industrial Services and U.K. Building Services.

U.S. Construction Services: This segment's revenues were up 21.1% year over year to $2.24 billion. The segment’s reported operating margin expanded by 290 basis points (bps) year over year to 11.7%.

Within the U.S. Construction umbrella, the U.S. Electrical Construction and Facilities Services segment’s revenues increased 7% year over year to $763.4 million. Operating income went up 31.3% and margin expanded 190 bps year over year to 10%. The U.S. Mechanical Construction and Facilities Services segment’s revenues rose 29.9% year over year to $1.47 billion. Its operating income rose 77.6%, while its margin expanded 340 bps year over year to 12.6%.

U.S. Building Services: Revenues in the segment were up 12.4% from the prior-year quarter’s levels to $802 million. The upside was backed by strong demand for energy efficiency and retrofit demand driven by indoor air quality projects.

Operating income increased 10.8% year over year and margin contracted 10 bps to 5.2%.

U.S. Industrial Services: This segment’s revenues increased 5.9% year over year to $292.5 million.

Operating income increased by 764.1% to $12.6 million year over year and operating margin expanded 380 bps to 4.3%.

U.K. Building Services: This segment’s revenues declined 4% from the year-ago quarter to $108.8 million.

Despite a challenging macroeconomic environment, the segment’s operating income increased 22.3% to $5.5 million. The operating margin rose 110 bps to 5% year over year.

Operating Highlights

The gross margin expanded 260 bps year over year to 18% in the quarter. Selling, general and administrative expenses — as a percentage of revenues — were 9.6% compared with the prior-year quarter’s levels of 9.4%.

Operating income in the quarter amounted to $289.2 million, up 63.2% year over year.

Despite persistent inflationary and uncertain economic conditions, the operating margin of 8.4% expanded 240 bps from the prior-year quarter’s levels.

Liquidity & Cash Flow

As of Dec 31, 2023, EMCOR had cash and cash equivalents of $789.8 million compared with $456.4 million at 2022 end. Long-term debt and finance lease obligations totaled $2.8 million, marking a significant decline from the 2022-end level of $231.6 million.

In 2023-end, net cash provided by operating activities was $899.7 million, up from $497.9 million in the year-ago period.

The remaining performance obligations at 2023-end increased 18.6% to $8.85 billion year over year.

2023 Highlights

Revenues of the company increased 13.6% from the year-ago level to $12.58 billion. The operating margin increased 190 bps to 7%.

The gross margin improved by 210 bps from the prior year to 16.6% in 2023.

Selling, general and administrative expenses increased 16.6% to $1.2 billion from the previous year.

Earnings per share increased 64.3% from the previous year to $13.31.

2024 Outlook

The company expects annual revenues to range between $13.5 billion and $14 billion.

Earnings per share are expected to be between $14.00 and $15.00.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

The consensus estimate has shifted 11.03% due to these changes.

VGM Scores

Currently, Emcor Group has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Emcor Group has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.