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EMCOR (EME) Hits 52-Week High: What’s Driving the Stock?


Shares of EMCOR Group, Inc. EME scaled a fresh 52-week high of $71.60 on Nov 23, before sliding a notch lower to close at $71.56.

The company’s share price has charted a solid trajectory in recent times, having appreciated over 49% year to date, far ahead of the S&P 500’s roughly 9%, over the same time frame. Notably, the company has witnessed an impressive 26.9% jump in share price over the past month, when it released promising third-quarter 2016 results.

In its third-quarter results which EMCOR released on Oct 27, both the top and the bottom line came ahead of the Zacks Consensus Estimate.

In fact, backed by the encouraging results, the company raised its earnings guidance as well. For 2016, it now projected that adjusted earnings from continuing operations will come in a range of $3.10–$3.20 (up from previous projections of $2.90–$3.10 per share).

EMCOR’s earnings have beaten estimates thrice over the trailing four quarters, for an impressive average beat of 12%. Its third-quarter earnings surpassed estimates by 11.8%

Meanwhile, the stock’s bullish prospects are further exemplified by the upward estimate revisions that it has been witnessing. The current fiscal year estimates and that for 2017 for the company have moved north by 3.2% and 6.9% respectively, over the past month.

EMCOR GROUP INC Price, Consensus and EPS Surprise

EMCOR has been gaining from its diversified business structure, which enables it to tap opportunities and neutralize operating risks associated with economic down-cycles. In the recently-reported third quarter, the company recorded strong revenue growth, driven by broad-based, robust organic performance across the company’s domestic segments, along with solid contribution from its recent acquisitions.

Its major segments, namely the U.S. Mechanical Construction segment and the U.S. Electrical Construction segments, are witnessing robust momentum. While increased project activity within the commercial and transportation market sector has been driving the growth of the U.S. Electrical Construction segment, the U.S. Mechanical Construction segment’s growth is being supported by sturdy performance across all end market markets, including commercial, water, and industrial.

Also, outstanding performance in the building services, driven by strong demand for mechanical retrofit project services, bodes well for the company’s long-term growth.

Its solid top-line performance, accretive acquisitions and increasing traction in the U.S. construction space, led EMCOR to raise its 2016 earnings guidance. Further, buoyed by the current size and mix of its backlog and overall positive market conditions, EMCOR raised its 2016 top-line guidance. For full-year 2016, the company now expects revenues to be roughly $7.5 billion (up from prior projections of a range of $7.4 billion).

Further, during the year, EMCOR acquired Ardent Services, L.L.C. and Rabalais Constructors, LLC, which are established providers of electrical and instrumentation services to the energy infrastructure market in North America. These buyouts are expected to be strongly accretive to EMCOR’s earnings in 2017.

This has been a solid year so far for EMCOR, as the company set new records for revenues, operating income and net income. Outstanding performance in the construction segment, building services and UK segments has set the tone for strong future growth of this Zacks Rank #1 (Strong Buy) company.

However, EMCOR is facing higher restructuring expenses that will likely hurt its profitability and contract margins over the short run. In addition, adverse impact of foreign currency volatility remains a concern, particularly the weakening British Pound.

Other Stocks to Consider

Some other stocks in the broader construction sector include Simpson Manufacturing Co., Inc. SSD, Gibraltar Industries, Inc. ROCK and MasTec, Inc. MTZ.

Simpson Manufacturing designs, engineers, manufactures, and sells building construction products. The company has a striking earnings surprise history for the trailing four quarters, having beaten estimates in each of them, for an average of 18.8%. It sports a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

Gibraltar Industries also boasts a Zacks Rank #1 and is a leading manufacturer and distributor of building products. The company has a striking earnings history, with a remarkable average positive surprise of 67.3% for the trailing four quarters, driven by four robust beats.

MasTec, an infrastructure construction company, carries a Zacks Rank #2 (Buy). It has registered a remarkable positive average surprise of over 61.3% in the four trailing quarters, beating estimates all through.

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