EMCOR Group, Inc. EME is scheduled to report fourth-quarter 2024 results on Feb. 26, before the opening bell.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

In the last reported quarter, EMCOR delivered strong financial results, with record revenues of $3.7 billion, reflecting a 15.3% year-over-year increase and surpassing the Zacks Consensus Estimate by 0.4%. The company reported earnings per share (EPS) of $5.80, exceeding the consensus mark by 16.2% and increasing 60.7% year over year. Operating income surged 54.7% to $363.5 million, and cash flow generation more than doubled, reaching $526 million. The company's record backlog (Remaining Performance Obligations, or RPOs) grew to $9.8 billion, up 13.4% from the prior year.

This specialty contracting services provider surpassed earnings estimates in each of the trailing four quarters, with an average of 32.3%. You can see the historical figures in the chart below.

Image Source: Zacks Investment Research

How are Estimates Placed for EME Stock?

The Zacks Consensus Estimate for the fourth-quarter EPS has remained unchanged at $5.54 over the past 60 days. The estimated figure indicates 23.9% growth from the year-ago reported figure. The consensus mark for revenues is $3.87 billion, suggesting a 12.6% year-over-year increase. For 2024, EME is expected to witness 55.5% growth from the 2023 level.

For 2025, EME is expected to register 7.2% EPS growth from a year ago.

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What the Zacks Model Unveils for EMCOR

Our proven model does not conclusively predict an earnings beat for EMCOR for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Earnings ESP: EME 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.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Influencing EMCOR’s Q4 Performance

Despite persistent inflationary and uncertain economic conditions, EMCOR’s revenues and earnings are expected to have increased in the fourth quarter of 2024. The company has been benefiting 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.

The company remains confident in its ability to sustain momentum, driven by a solid backlog of $9.8 billion (as of the third-quarter end) and continued demand in key growth sectors such as data centers, semiconductor manufacturing, healthcare and industrial services. These tailwinds are likely to have aided its top line in the to-be-reported quarter.

Again, we believe the recent Miller Electric acquisition is expected to be favorable for EMCOR, given its meaningful exposure to the faster-growing Florida market and data centers (approximately 25% of Miller Electric sales). Miller Electric generates about 90% of its revenues from Florida and the greater Southeastern United States, regions where EMCOR has had limited electrical construction operations. EMCOR expects Miller Electric to generate approximately $805 million in revenues and approximately $80 million in Adjusted EBITDA in the calendar year 2024.

Despite the positive outlook, revenue recognition in the fourth quarter will be influenced by project timing and execution of backlog orders. Some projects in EMCOR's RPO pipeline are set to begin between late fourth quarter of 2024 and early 2025, leading to a natural lag between contract awards and revenue realization. The company has emphasized that while its backlog remains strong, project start dates can fluctuate, which may cause some variation in quarterly revenue figures.

However, increased material and labor woes are likely to have negatively impacted the company’s performance in the fourth quarter. Potential downturns in global energy markets and supply-chain disruption due to international conflicts could also impact EMCOR's profitability in the quarter to be reported.

EME Stock Price Performance & Valuation

EME stock has exhibited a downward movement in the past three-month period and underperformed the Zacks Building Products - Heavy Construction industry, the broader Construction sector and the S&P 500 index, as you can see below.

EMCOR stock has declined 24% since the DeepSeek AI-related market selloff on Jan. 27, 2025. EME has already fallen 26% since its 52-week high of $545.29 on Jan. 22 while trading way below the 50-day or 200-day moving averages, as shown below.

During the past three-month period, EMCOR has also lagged competitors like Dycom Industries (DY, down 5.6%), AECOM (ACM, down 16.6%) and MasTec, Inc. (MTZ, down 11.6%).

EME’s 3-Month Price Performance

Image Source: Zacks Investment Research

EME Stock’s 50-Day & 200-Day Moving Averages

Image Source: Zacks Investment Research

Challenges Faced by EMCOR

While the company has a strong backlog, timing uncertainties surrounding new project starts and execution could impact revenue recognition. Some awarded projects are not expected to begin until early 2025, creating potential short-term revenue fluctuations.

Continued supply-chain disruptions, inflationary pressures and fluctuating interest rates remain concerns. Although EMCOR has successfully navigated these issues in the past, sustained economic volatility could impact costs and profitability.

EMCOR experienced a decline in revenues in the third quarter from the commercial real estate sector due to reduced demand and the completion of large-scale warehousing and distribution projects. The office market remains weak, limiting opportunities in new commercial construction.

Also, skilled labor shortages are a challenge across the construction and industrial services sectors.

Is EMCOR Fairly Valued?

Presently, EME stock is trading at a premium compared to the industry average, as shown in the chart below. The stock is trading at a forward 12-month P/E ratio of 18.07 — higher than the Zacks Building Products - Heavy Construction industry average of 16.33 and well above its three-year median of 17.54.

EMCOR is trading beyond historical valuation levels. The stock is still overvalued despite its significant decline.

EMCOR’s P/E Ratio (Forward 12-Month) vs. Industry

Image Source: Zacks Investment Research

Nonetheless, its trailing 12-month return on equity of nearly 35% far exceeds the industry average of 14.6%, underscoring its efficiency in generating shareholder returns.

Image Source: Zacks Investment Research

Investment Thoughts: Buy, Sell or Hold EME Stock?

EMCOR’s fourth quarter should reflect confidence in its operational strength and market positioning and also acknowledge the impact of project timing and economic uncertainties. While revenue growth in high-impact sectors like data centers and manufacturing remains strong, the company will need to manage potential challenges such as supply-chain disruptions, labor availability and macroeconomic factors that could influence construction demand. Nonetheless, with a well-diversified backlog and disciplined execution strategy, EMCOR expects to end the year on a strong note and enter 2025 with continued growth momentum.

Owing to market volatility and expensive valuation, investors may wish to wait for clearer signs of performance stability and favorable market conditions, particularly monitoring the upcoming earnings call on Feb. 26, before considering an investment.

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This article originally published on Zacks Investment Research (zacks.com).

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