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Why Is Emcor Group (EME) Up 3.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Emcor Group (EME - Free Report) . Shares have added about 3.6% 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 catalysts.

EMCOR Q4 Earnings Beat Estimates, Up Y/Y

EMCOR Group Inc. reported fourth-quarter 2018 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. In fact, this quarter marked the eighth consecutive earnings beat for the company. The company remains optimistic about the opportunities to drive continued growth across business, going forward.

Adjusted earnings during the quarter came in at $1.38 per share, beating the consensus mark of $1.36 by 1.5%. Also, the reported figure increased 53.3% from the year-ago quarter. The improvement was driven by continued strength in U.S. Industrial segments along with improved segmental margins.

The company generated a record $2.23 billion in revenues, which surpassed the Zacks Consensus Estimate of $2.06 billion by 8.5% and grew 10.8% year over year. The positive performance mainly stemmed from robust revenue performance in U.S. Construction segments.

Segment Details

The U.S. Construction segment maintained its robust momentum owing to strong revenues. The U.S. Electrical Construction and facilities services segment revenues rose 11.4% year over year. Also, the U.S. Mechanical Construction and facilities services segment revenues increased 2.2% from a year ago during the quarter.

The U.S. Building Services segment revenues grew 10.9% year over year on the back of strong execution in mechanical, energy and commercial site-based services businesses.

The U.S. Industrial Services revenues also increased 44.1% year over year, given improvement in both shop and field services operations, which include turnaround project activity.

Importantly, revenues from total U.S. operations grew 11% year over year to $2.13 billion.

The U.K. Building Services segment also maintained its growth trajectory, with 5.4% year-over-year revenue improvement owing to continued project activity.

Operating Highlights

Selling, general and administrative expenses, as a percentage of revenues, decreased 30 basis points (bps) to 9.9% from the prior-year figure of 10.2%.

The company’s operating income was $113.6 million during the quarter, significantly higher than $48.1 million in the prior-year period. Operating margin was 5.1%, up 270 bps from the prior-year figure of 2.4%. The upside was mainly driven by exceptional execution of cost-control measures.

Liquidity & Cash Flow

EMCOR’s cash and cash equivalents totaled $363.9 million as of Dec 31, 2018 compared with $467.4 million in the corresponding period of 2017. Long-term debt and capital lease obligations came in at $254.8 million, down from $269.8 million recorded on Dec 31, 2017.

As of Dec 31, 2018, net cash provided by operating activities totaled $271 million compared with $366 million in the comparable year-ago period.

Full-Year 2018 Highlights

In full-year 2018, EMCOR reported adjusted earnings of $4.91 per share, surpassing the Zacks Consensus Estimate of $4.88 by 0.6%. Revenues of $8.13 billion also surpassed the consensus mark of $7.96 billion by 2.1%. On a year-over-year basis, both the top and bottom lines grew 5.8% and 20.9%, respectively. Adjusted operating margins were in line with the prior-year figure of 5%.

2019 Guidance

Buoyed by solid market conditions and favorable project mix, EMCOR has provided its view for full-year 2019 earnings as well as revenues.

The company expects earnings from continuing operations within $4.70-$5.40 a share. EMCOR projects revenues between $8.3 billion and $8.4 billion in 2019.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, Emcor Group has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

Outlook

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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