Should Investors Buy EMCOR (EME) Ahead of Q1 Earnings?

EMCOR Group, Inc. EME is scheduled to report first-quarter 2024 results on Apr 25, before the opening bell.

Gaining from success in key sectors such as high-tech manufacturing, network and communications, manufacturing and industrial and healthcare, the stock has outperformed the industry this year. Sporting a Zacks Rank #1 (Strong Buy), EME exceeded the earnings mark in each of the past four quarters, with the average surprise being 28%. Given the company’s positive track record, is EME a buy?

The Zacks Consensus Estimate for EME’s first-quarter earnings have increased to $2.92 from $2.63 in the past 60 days. The estimated figure indicates a 25.9% increase on a year-over-year basis.
 

EMCOR Group, Inc. Price and EPS Surprise

 

EMCOR Group, Inc. Price and EPS Surprise

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


In the last reported quarter, its earnings surpassed the Zacks Consensus Estimate by 27.4% and rose 70% from the year-ago quarter’s levels. Revenues also increased 16.6% year over year and topped the consensus mark by 5.6%. Given these impressive results, let's delve into what’s going on with the stock and why it could be a promising investment.

Factors to Note

EMCOR’s first-quarter 2024 performance is likely to have benefited from increased project flows from high-tech manufacturing and network and communications market sectors due to solid demand for semiconductor and data center construction projects.

It is also improving on strength in the combined U.S. Construction segments and the U.S. Building Services segment, backed by solid end-market demand as well as top-tier execution initiatives. These tailwinds are likely to have aided the company’s top-line in the to-be reported quarter.

However, increased material and labor costs are likely to have impacted the company’s performance in the first quarter. Although the company expects energy prices to decline in the long term but currently, they are likely to impact the bottom line to some extent.

A Buy Ahead of Q1 Earnings?

The company continues to witness robust multi-year growth across various market sectors it serves. Its scale and operational excellence distinguish it in the marketplace, making its operating companies formidable partners for customers. The diversity in its RPOs showcases its flexibility and capability to adapt to market trends effectively.

EME anticipates potential changes in the pace and compositions of RPOs throughout 2024, driven by evolving customer contracting patterns and increasing familiarity with their site buildup. Supply chain issues and lead times are now being considered in initial planning to prevent previous delays, particularly in Building Services.

The company has a good acquisition pipeline. During the fourth quarter of 2023earnings call the company stated that it has signed definitive agreements to purchase a Texas-based company and one in the Greater Atlanta area, both adding capabilities to its mechanical construction segment. Another acquisition or agreement was made for a company, which will be a bolt-on for its mechanical services division. It anticipates closing these deals as it moves further into 2024, aiming to expand its capabilities and increase its geographic reach to better serve customers.

What the Zacks Model Says

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, 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.

EMCOR currently has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

EME currently carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With the Favorable Combination

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

Willdan Group, Inc. WLDN has an Earnings ESP of +47.37% and a Zacks Rank #1.

WLDN’s earnings topped the consensus mark in three of the last four quarters and met on one occasion, the average being 886.3%. Earnings for the to-be-reported quarter are expected to decline 40.6% year over year.

Dream Finders Homes, Inc. DFH has an Earnings ESP of +7.14% and a Zacks Rank #1.

DFH’s earnings topped the consensus mark in the last four quarters, the average being 144.9%. Earnings for the to-be-reported quarter are expected to rise 55.6% year over year.

Dycom Industries, Inc. DY has an Earnings ESP of +0.43% and a Zacks Rank #2.

DY’s earnings topped the consensus mark in three of the last four quarters and missed on one occasion, the average being 53.9%. Earnings for the to-be-reported quarter are expected to decline 19.7% year over year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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EMCOR Group, Inc. (EME) : Free Stock Analysis Report

Dycom Industries, Inc. (DY) : Free Stock Analysis Report

Willdan Group, Inc. (WLDN) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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