EMCOR (NYSE:EME) Beats Q1 Sales Targets, Full-Year Outlook Slightly Exceeds Expectations

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.

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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.

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.

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.

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.

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.

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 may have had a good quarter, but does that mean you should invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.