EMCOR (EME) Q2 Revenue Jumps 17%

Globe and Mail

3 days ago

Key Points
EMCOR Group (NYSE:EME) posted record GAAP revenue and GAAP EPS for Q2 2025, surpassing Wall Street expectations (GAAP) for the quarter.
Operating margins reached a new milestone during the quarter, driven by strength in construction segments and a record project backlog.
The company raised its full-year FY2025 revenue guidance to $16.4 billion–$16.9 billion and its non-GAAP diluted EPS guidance to $24.50–$25.75, reflecting continued confidence in future growth.
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EMCOR Group (NYSE:EME), a leading specialty contractor delivering mechanical and electrical construction, building services, and industrial projects, released its Q2 FY2025 results on July 31, 2025. The major highlight was another record-setting quarter, with GAAP revenue and GAAP diluted earnings per share (EPS) both beating analyst expectations. Revenue (GAAP) reached $4.30 billion, versus the forecasted $4.11 billion, while GAAP EPS came in at $6.72, well above the $5.74 consensus. These results marked significant year-over-year growth and set new company records. The quarter was marked by strong execution in core business areas, robust growth in project backlog, and meaningful positive impact from recent acquisitions. Overall, it was a quarter of outperformance, with continued momentum across key metrics.
Metric Q2 2025 Q2 2025 Estimate Q2 2024 Y/Y Change
EPS (GAAP) $6.72 $5.74 $5.25 28.0%
Revenue (GAAP) $4.30 billion $4.11 billion $3.67 billion 17.2%
Operating Margin (GAAP) 9.6% 9.1% 0.5 pp
Net Income $302.2 million $247.6 million 22.1%
Remaining Performance Obligations ('RPOs') $11.91 billion $9.00 billion 32.4%
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Recent Strategic Focus
EMCOR Group operates as one of the largest specialty contractors in the United States, offering services such as mechanical construction (heating, ventilation, air conditioning, and plumbing), electrical contracting, facilities management, and industrial maintenance. Its business spans a wide range of markets, including healthcare, technology, institutional, and manufacturing. The company's operations are heavily focused in the U.S, with 97% of revenue generated domestically, allowing it to leverage local knowledge, maintain close customer relationships, and participate directly in national infrastructure investment trends.
Key to EMCOR's recent trajectory has been its emphasis on diversification and expansion into high-growth sectors such as data centers, healthcare, and sustainable energy. This diversification is viewed as a buffer against sector-specific downturns, while also opening up multiple avenues for future growth. Recent large-scale projects, along with targeted acquisitions such as Miller Electric, have enhanced the company's breadth of offerings and added to its project pipeline. EMCOR's expertise in managing complex, technically demanding projects across multiple industries is a central aspect of its ongoing success.
Quarter Highlights: Financial and Business Performance
The second quarter featured record financial results. GAAP EPS of $6.72 topped the $5.74 analyst estimate, a 17.1% beat, while revenue of $4.30 billion (GAAP) surpassed the $4,109.08 million analyst estimate. Both top-line and bottom-line results set new quarterly company records (GAAP), with year-over-year GAAP revenue growth of 17.4% and GAAP diluted EPS growth of 28.0%. Operating margin (GAAP) rose to 9.6%, up from 9.1% in Q2 2024. The gains were powered largely by the company's Electrical and Mechanical Construction segments. Notably, although Miller's integration initially weighed on segment margins due to acquisition-related amortization costs.
In segment detail, U.S. Electrical Construction and Facilities Services revenue jumped 67.5% year-over-year, propelled by substantial contributions from the Miller Electric acquisition and robust demand in areas such as data centers, healthcare, and institutional spaces. Operating margin for this segment hit a high of 11.8% (GAAP). Mechanical Construction and Facilities Services revenue climbed 6% year-over-year, with a segment record operating margin of 13.6% as the company continued shifting away from lower-margin site-based contracts toward more profitable mechanical services. Industrial Services, however, struggled, with revenue dropping 13.3% (GAAP) and a sharp fall into negative operating income.
The company saw costs rise, notably selling, general, and administrative (SG&A) expenses (GAAP), which increased to $418.6 million or 9.7% of revenue, up from $351.2 million, or 9.6%, in Q2 2024. This uptick was tied to increased staff, higher incentive compensation driven by strong results, and the costs of integrating recent acquisitions. Management noted that it expects this ratio to normalize through the remainder of the year as integration costs abate. Depreciation and amortization expenses also rose. There were no material one-time events outside the Miller Electric acquisition that had a direct financial impact in the period.
EMCOR's project pipeline was another highlight, with Remaining Performance Obligations (RPOs)—the value of booked, but not yet recognized, revenue—surging to a record $11.91 billion, up 32.4% from the prior year. This backlog was buoyed by wins in data center, healthcare, institutional, and entertainment sectors. Data center work is now a primary growth driver, evidenced by significant multi-site expansion and an increase in project complexity and scope. About 20% of RPOs are scheduled for recognition after the next 12 months as of the end of Q1 2025, reflecting the shift to larger and longer-duration projects in areas such as water/wastewater treatment and multi-year data center builds.
Segment mix also continued to evolve. The Electrical and Mechanical Construction businesses are the primary growth engines, driven by both organic performance and the impact of acquisitions. Building Services are being reshaped to prioritize higher-margin mechanical contracts. Industrial Services remained a challenge, and management is focused on stabilizing this segment moving forward. EMCOR's business mix and execution capabilities—especially its adoption of prefabrication and virtual design and construction (VDC) methods—enabled consistent margin improvement and strong performance, particularly on complex and technically demanding jobs.
The company pays a quarterly dividend. The dividend was maintained at $0.25 per share, unchanged from Q2 2024.
Market Opportunity, Expertise, and Project Pipeline
EMCOR's diversified service model allows it to meet demand across different sectors. Data center projects—a type of network and communications infrastructure—continued to stand out in the period, accounting for the majority of growth in the Electrical Construction segment. These projects now span more than 16 sites nationally, a sharp increase from three only a few years ago. EMCOR wins contracts to provide everything from high- and low-voltage wiring to fire protection (life-safety) and advanced cooling systems. Its involvement with the largest and most technically demanding data centers supports the higher backlog.
Healthcare construction and renovation work is a close second in growth contribution, with RPOs in this sector rising 38% year-over-year as of Q1 2025. EMCOR's breadth in managing HVAC (heating, ventilation, air conditioning), plumbing, medical gas systems, and electrical infrastructure positions it well for complex hospital and research-lab projects.
Another focus area is sustainable energy solutions, including projects that improve energy efficiency and reduce carbon emissions for clients. EMCOR's expertise in integrating these systems is a selling point for winning complex, multi-phase jobs.
A key differentiator for EMCOR continues to be its ability to deliver large, multi-trade, and technically complex projects safely and on schedule. Its focus on project execution, labor planning, and sharing best practices within its network of subsidiaries enhances both results and reputation. The safety record and ability to meet labor needs for technically demanding sites remain competitive strengths.
Looking Forward: Guidance and Watch Points
EMCOR raised its full-year FY2025 outlook, increasing revenue guidance to $16.4 billion–$16.9 billion and non-GAAP diluted EPS guidance to $24.50–$25.75, on the back of strong results and a record pipeline. It now expects revenue between $16.4 billion and $16.9 billion for FY2025, up from the previous range of $16.1 billion to $16.9 billion. Non-GAAP diluted EPS guidance for FY2025 is $24.50 to $25.75, compared to the earlier $22.65 to $24.00. It also raised its full-year 2025 operating margin target to 9.0%–9.4%, compared to a prior outlook of 8.5%–9.2%. These adjustments reflect management's view that the robust backlog and strong execution are likely to continue supporting top and bottom-line growth. Guidance excludes further integration costs from the Miller Electric acquisition.
Investors should keep an eye on several developing trends for the remainder of the year. Cost trends, especially the level of SG&A expense relative to revenue, remain a focal point as management works to contain integration and compensation-related expense growth. The Industrial Services segment has been a drag on margins and results; recovery here is an important milestone to watch. The cash position declined after recent acquisitions and share repurchases, as reflected by a decrease in cash and cash equivalents from $1,339.6 million at December 31, 2024, to $576.7 million at March 31, 2025, and to $486.0 million at June 30, 2025 (GAAP, Q1 and Q2 2025), and drew $250 million on its revolving credit facility in Q1 2025. Management signaled confidence in the company's cash generation and balance sheet. Finally, the ongoing shift in backlog—with more revenue poised for recognition beyond the next 12 months (approximately 20% of RPOs as of Q1 2025)—signals a move toward longer-duration, larger projects, improving future visibility.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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