Specialty construction contractor company EMCOR (NYSE:EME) announced better-than-expected revenue in Q1 CY2025, with sales up 12.7% year on year to $3.87 billion. The company’s full-year revenue guidance of $16.5 billion at the midpoint came in 0.8% above analysts’ estimates. Its non-GAAP profit of $5.41 per share was 17% above analysts’ consensus estimates.
Revenue: $3.87 billion vs analyst estimates of $3.78 billion (12.7% year-on-year growth, 2.2% beat)
Adjusted EPS: $5.41 vs analyst estimates of $4.63 (17% beat)
Adjusted EBITDA: $334.3 million vs analyst estimates of $328.5 million (8.6% margin, 1.8% beat)
The company reconfirmed its revenue guidance for the full year of $16.5 billion at the midpoint
Adjusted EPS guidance for the full year is $23.33 at the midpoint, beating analyst estimates by 0.6%
Operating Margin: 8.2%, in line with the same quarter last year
Free Cash Flow Margin: 2.1%, down from 3.3% in the same quarter last year
Market Capitalization: $18.61 billion
Tony Guzzi, Chairman, President, and Chief Executive Officer of EMCOR, commented, “Our first quarter results—which include 12.7% year-over-year revenue growth, a 22.6% increase in operating income, and $11.75 billion in remaining performance obligations—demonstrate the continued strength of our business. Once again, results were driven by our U.S. Electrical Construction and U.S. Mechanical Construction segments, which had year-over-year revenue growth of 42.3% and 10.2%, respectively, and operating margins of 12.5% and 11.9%, respectively. Our performance reflects our customers' confidence in our ability to execute complex projects across diverse end markets, as well as our proactive expansion into new geographies, and our productivity resulting from the use of virtual design and construction technologies and prefabrication capabilities. Coupled with sustained excellence in labor planning, large project coordination, and the sharing of best practices, we delivered exceptional results for our customers.”
Company Overview
Through its network of over 70 subsidiaries, EMCOR (NYSE:EME) provides electrical, mechanical, and building construction and services
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, EMCOR grew its sales at a solid 10% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
EMCOR Quarterly Revenue
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. EMCOR’s annualized revenue growth of 14.8% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.
EMCOR Year-On-Year Revenue Growth
We can better understand the company’s revenue dynamics by analyzing its most important segments, Mechanical Construction and Facilities Services and Building Services , which are 40.7% and 19.2% of revenue. Over the last two years, EMCOR’s Mechanical Construction and Facilities Services revenue (design, integration, installation) averaged 22.7% year-on-year growth while its Building Services revenue (maintenance, electrical, plumbing) averaged 4.3% growth.
This quarter, EMCOR reported year-on-year revenue growth of 12.7%, and its $3.87 billion of revenue exceeded Wall Street’s estimates by 2.2%.
Looking ahead, sell-side analysts expect revenue to grow 10.7% over the next 12 months, a deceleration versus the last two years. We still think its growth trajectory is attractive given its scale and implies the market sees success for its products and services.
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Operating Margin
EMCOR was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.5% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.
On the plus side, EMCOR’s operating margin rose by 6.3 percentage points over the last five years, as its sales growth gave it immense operating leverage.
EMCOR Trailing 12-Month Operating Margin (GAAP)
In Q1, EMCOR generated an operating profit margin of 8.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
EMCOR’s EPS grew at an astounding 31.4% compounded annual growth rate over the last five years, higher than its 10% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
EMCOR Trailing 12-Month EPS (Non-GAAP)
We can take a deeper look into EMCOR’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, EMCOR’s operating margin was flat this quarter but expanded by 6.3 percentage points over the last five years. On top of that, its share count shrank by 18.5%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
EMCOR Diluted Shares Outstanding
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For EMCOR, its two-year annual EPS growth of 58.3% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q1, EMCOR reported EPS at $5.41, up from $4.17 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects EMCOR’s full-year EPS of $22.79 to grow 2.6%.
Key Takeaways from EMCOR’s Q1 Results
We enjoyed seeing EMCOR beat analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Looking ahead, the company reconfirmed its full-year revenue guidance, which is comforting in this uncertain macro backdrop. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $414.97 immediately after reporting.
EMCOR had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
