EMCOR Group, Inc. EME reported impressive second-quarter 2023 results, with earnings and revenues surpassing the Zacks Consensus Estimate and increasing year over year.
Strength across the segments and market helped the company to achieve 11% higher organic revenues.
The company witnessed significant increases in high-tech manufacturing and network and communications market sectors, driven by strong demand for semiconductor, data center construction projects and EV value chain.
Following the results, shares of the company rose 6% during the trading session on Jul 27.
Earnings & Revenue Discussion
The company reported adjusted earnings of $2.95 per share, surpassing the consensus mark of $2.37 by 24.5% and increasing 48.2% from the year-ago quarter’s figure of $1.99.
EMCOR Group, Inc. Price, Consensus and EPS Surprise
EMCOR Group, Inc. price-consensus-eps-surprise-chart | EMCOR Group, Inc. Quote
Revenues totaled $3.05 billion, surpassing the consensus mark of $3.02 billion by 0.8% and rising 12.5% year over year.
EMCOR currently operates in four reportable segments — 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 15.4% year over year to $1.87 billion year over year. Our estimate for segment’s revenues was $1.91 billion. Segment operating margin increased 220 basis points (bps) year over year to 9.1%.
Within the U.S. Construction umbrella, the U.S. Electrical Construction and Facilities Services segment’s revenues increased 20.2% year over year to $678.2 million. Operating income went up 44.5% and margin expanded 130 bps year over year to 7.5%. The U.S. Mechanical Construction and Facilities Services segment’s revenues rose 12.9% from a year ago to $1.19 billion. Its operating income grew 56.4%, while its margin expanded 280 bps year over year to 10%.
U.S. Building Services: Revenues in this segment were up 12.9% from the prior-year quarter’s levels to $775 million, driven by strong demand for retrofit projects, building automation and controls and maintenance and service repair work. Our estimate was $745 million.
Operating income increased 19.9% year over year and margin improved 40 bps to 6%.
U.S. Industrial Services: This unit’s revenues increased 2.7% year over year to $292.3 million. Our estimate was $301.1 million.
Operating income grew 22.1% year over year and operating margin increased 40 bps to 2.7%. The modest increases in the demand driven by greater new build heat exchanger orders resulted in growth of this segment.
U.K. Building Services: This segment’s revenues declined 7.4% from the year-ago quarter to $106 million. Our estimate was $120.8 million.
Operating income declined 7.6% and operating margin were on par with the prior-year quarter’s levels of 5.6%. This decline was due to challenging market conditions.
Gross margin contracted 200 bps year over year to 16.1% in the quarter. Our estimate was 14.5%. Selling, general and administrative expenses — as a percentage of revenues — were 9.6% compared with prior-year quarter’s levels of 9.1%.
Operating income in the quarter amounted to $196.7 million, up 42.9% year over year. Our estimate was $153.5 million.
Despite persistent inflationary and supply chain woes, the operating margin of 6.5% expanded 140 bps from the prior-year quarter’s levels. Our estimate was 5.1%.
Liquidity & Cash Flow
As of Jun 30, 2023, EME had cash and cash equivalents of $503.1 million compared with $456.4 million at 2022-end. Long-term debt and finance lease obligations totaled $231.5 million, almost on par with the 2022-end level of $231.6 million.
Net cash provided by operating activities was $215 million in first half of 2023, versus $18.9 million net cash used in operating activities in the prior-year.
The remaining performance obligations or RPOs as for Jun 30, 2023, were $8.29 billion, up 28.2% year over year.
Maintained 2023 View
The company maintained annual revenues guidance range of $12- $12.5 billion.
Earnings per share are expected to be within $10.75-$11.25, up from the previously expected range of $9.25-$10.00. The effective tax rate is likely to be 27.5-28% for 2023.
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.
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