EMCOR Group Q2 Earnings Call Highlights

EMCOR Group NYSE: EME reported record second-quarter revenue, operating income and remaining performance obligations, driven by strong demand in data centers, institutional projects, manufacturing and industrial work, and other end markets. The company also raised its full-year 2026 revenue and earnings outlook.

Second-quarter revenue rose 19.8% year over year to $5.15 billion, including organic growth of 19.6% after excluding acquisitions and the divestiture of EMCOR UK. Operating income increased nearly 32% to $547.3 million, while operating margin expanded 100 basis points to 10.6%. Diluted earnings per share climbed 35% to $9.06 from $6.72 in the prior-year quarter.

“EMCOR delivered another outstanding quarter, highlighted by exceptional organic growth, strong conversion of revenue into operating income and cash flow, continued booking strength, and record remaining performance obligations,” Chairman, President and Chief Executive Officer Tony Guzzi said.

Construction Segments Lead Growth

Electrical construction revenue increased 24% to $1.66 billion, led primarily by a 45% increase in network and communications revenue, which includes the company’s data center business. The segment generated operating income of $231.4 million, up 46.8% from a year earlier, with operating margin rising 210 basis points to 13.9%.

Chief Financial Officer Jason Nalbandian said electrical construction benefited from field execution and a more favorable project mix, with most of the margin improvement coming from higher gross profit margin.

Mechanical construction revenue grew more than 31% to $2.3 billion. Revenue in the network and communications market more than doubled from the prior-year quarter, supported by increased cooling requirements for data centers and expansion into adjacent geographies. The segment also recorded a 77% increase in institutional revenue, a 26% increase in commercial revenue tied in part to warehousing, distribution and logistics projects, and an 18% increase in manufacturing and industrial revenue.

Mechanical construction operating income rose 20.1% to $286.6 million. Its 12.5% operating margin was down 110 basis points year over year, reflecting a greater share of projects in which EMCOR serves as construction manager or prime contractor, along with more guaranteed maximum price and cost-plus contracts. Nalbandian said the shift was driven in part by water and wastewater and food-processing work, as well as more complex data center projects.

Combined, the electrical and mechanical construction segments generated quarterly revenue of $3.96 billion, up 28%, and a combined operating margin of 13.1%.

Services Results and Record Backlog

U.S. building services revenue increased 5.6% to $837.7 million, while operating income rose 26.6% to $63.4 million. The segment’s operating margin expanded 130 basis points to 7.6%, aided by a more favorable project mix, improved execution and restructuring actions in commercial site-based services.

Industrial services revenue rose nearly 26% to $353.8 million, driven by field-services activity, increased petrochemical project volume, turnaround work and progress on a large solar project. The segment generated operating income of $9.6 million, representing a significant improvement from the prior-year period.

EMCOR ended the quarter with record remaining performance obligations, or RPOs, of $17.14 billion. That figure was up 44% from a year earlier, 29% from December and 10% sequentially from March. Guzzi said 95% of the RPO growth was organic.

Demand in network and communications, led by data centers, remained “exceptionally strong,” according to Guzzi. He said customer investment in artificial intelligence infrastructure and digital transformation initiatives continued to create opportunities. RPO growth was also broad-based, with strong bookings in water and wastewater, healthcare and institutional markets.

Management said a larger volume of recently booked work and longer-duration projects have affected the timing of revenue conversion. Nalbandian said historically about 85% of RPOs burned within 12 months, compared with roughly 75% to 76% currently, reflecting project size, water and wastewater work, and the volume of new bookings.

Acquisitions and Capital Allocation

The company discussed five electrical construction acquisitions: B&B Electric in Wisconsin, Sidney Electric in Ohio, Giles Electric in Florida, Schmidt Electric in Central Texas and Connelly Electric in the Chicago-area market. Guzzi said the businesses expand EMCOR’s trade expertise, geographic coverage and ability to serve customers in growing markets.

The five businesses collectively generated $625 million in revenue and $105 million in EBITDA during the trailing 12 months ended June 30. EMCOR expects the acquisitions to contribute between $250 million and $275 million of revenue during the second half of 2026. Nalbandian said their near-term effect on diluted earnings per share would be limited by intangible asset amortization and reduced net interest income, though the businesses are expected to provide additional accretion as acquired backlog is completed over the following 12 to 18 months.

Management said Schmidt and Connelly are expected to close in the third quarter. The acquisitions include an upfront purchase price of $750 million, with up to $90 million in potential earn-outs for two of the transactions, according to Nalbandian.

EMCOR finished the quarter with $924 million in cash and $1.45 billion of working capital, and generated $289.4 million in operating cash flow during the quarter.

Guidance Raised

Based on first-half performance and its record RPO position, EMCOR raised its full-year 2026 outlook. The company now expects revenue of $20 billion to $20.5 billion and diluted earnings per share of $32 to $33.25.

Guzzi said the outlook assumes sustained demand, continued operating performance, disciplined project execution and pricing discipline. He also cited risks including geopolitical conflicts, commodity-cost fluctuations and equipment lead-time volatility, while saying the company’s teams have demonstrated an ability to manage through those conditions.

About EMCOR Group (NYSE:EME)

EMCOR Group, Inc is a provider of mechanical and electrical construction, industrial and energy infrastructure, and facilities services to commercial, institutional and industrial clients. The company delivers a broad range of services that include design-build and traditional construction of mechanical, electrical and plumbing systems; ongoing facilities maintenance and operations; and specialized industrial services for sectors such as manufacturing, data centers, healthcare and utilities.

EMCOR's service offerings encompass HVAC, plumbing, electrical installation and maintenance, fire protection, building automation and controls, commissioning, testing and balancing, and energy management solutions.

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