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Here’s Why You Should Add EMCOR (EME) to Your Portfolio

Zacks

EMCOR Group, Inc. EME has managed to impress investors with its recent earnings streak, wherein the company’s bottom line surpassed the Zacks Consensus Estimates consistently in the trailing four quarters. We believe solid non-residential construction demand, strong project execution and accretive acquisitions might continue to be growth drivers, going ahead.

Driven by these growth drivers, the company’s stock has had an impressive run on the bourse in the past six months. Shares of EMCOR have gained 17.1%, ahead of the industry’s average growth of 15.1%. We expect that the company’s impressive traction across markets to continue in the quarters ahead.


Given this backdrop, let’s delve deeper to find out the key factors that make this Zacks Rank #2 (Buy) company an attractive proposition for investors right now.

Factors to Consider

EMCOR’s key strengths include its diversified business structure, which enables it to tap opportunities and neutralize operating risks associated with economic down-cycles. In the fourth quarter of 2017, one of the company’s major segments — the U.S. Mechanical Construction — witnessed significant improvement driven by higher project activity within the health care, commercial, hospitality as well as institutional market sectors. Impressive performance in this segment along with building services set the tone for strong future growth.

Furthermore, the commercial market represents lucrative opportunities, given an increasing tendency among clients to upgrade buildings and other infrastructure-related services. Also, surging number of bus depots, tunnels, bridges & airports coupled with business prospects in the water market, imply that the company’s future in the transportation market remains bright. This apart, EMCOR’s solid backlog level, owing primarily to strong performance in U.S. Building Services, U.S. Industrial Services and U.K. Building Services segments, bodes well for the company.

Additionally, the company’s strategic acquisitions and alliances have helped it to enhance productivity and drive growth. For instance, the buyouts of Ardent Services and Rabalais Constructors will fortify EMCOR’s market leading position in electrical construction and services. We are also highly optimistic about the Ardent acquisition, which is expected to aid its Electrical business line secure large projects in the coming quarters. This apart, the company’s strong liquidity position enables it to invest in growth initiatives as well as acquisitions and share repurchases, thus improving financial performance.

Stocks to Consider

Some better-ranked stocks from the same space are Louisiana-Pacific Corporation LPX, Owens Corning Inc OC and TopBuild Corp. BLD. While Louisiana-Pacific sports a Zacks Rank #1 (Strong Buy), Owens Corning and TopBuild carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Louisiana-Pacific has surpassed estimates twice in the trailing four quarters, with an average positive earnings surprise of 5.2%.

Owens Corning has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 14.9%.

TopBuild has outpaced estimates in each of the preceding four quarters, with an average earnings surprise of 10.4%.

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