EMCOR Group, Inc. EME completed the acquisition of Batchelor & Kimball, Inc. (“BKI”) in an all cash transaction. The buyout has enabled the company to strengthen its position in mechanical construction and maintenance services. Also, it is likely to expand the company’s capabilities across the South and Southeast regions.
Benefits From BKI
BKI, now a part of EMCOR’s U.S. Mechanical Construction and Facilities Services segment, is a leading full-service provider of mechanical construction and maintenance services.
BKI has a record of designing, installing, constructing and maintaining the heating, ventilation, and air conditioning (HVAC) and plumbing systems in a number of projects for hospitals, laboratories, data centers, schools, airports as well as office buildings.
Courtesy of its best-in-class execution, deep operational and field-level expertise as well as leading safety record, BKI is expected to contribute revenues of approximately $400 million with nominal EPS accretion in 2020.
Expansion Efforts to Drive Revenues
EMCOR follows a systematic acquisition strategy that is directed toward buying small private firms with proven management and expansion potential. Markedly, the acquisition of three companies in first-half 2019 strengthened overall results by adding new markets, opportunities and capabilities. In the third quarter, acquisitions generated incremental revenues of $75.6 million. Particularly, in the U.S. Mechanical Construction segment (accounting for 35% of third-quarter 2019 revenues), acquisitions contributed $4.7 million to revenues.
During the third quarter, the U.S. Construction segment delivered robust revenue performance. Revenues in the segment increased 14.3% year over year, with organic growth of 10.4%.
Moreover, in 2018, it had acquired four companies that expanded its capabilities and geographical presence. These buyouts increased its mechanical services presence in the Mid-Atlantic and California, built leading positions in building controls in the New York City market and enabled the company to enter the important North Texas electrical construction market.
Price Performance
Owing to major contribution from U.S. Mechanical and Electrical Construction segments, shares of EMCOR have gained 51.7% year to date compared with the industry’s rally of 27%.
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The company’s performance is backed by an impressive earnings surprise history. EMCOR’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 10.2%. Along with robust performance and accretive acquisitions, EMCOR’s management is optimistic about gaining from prospects in the future.
Zacks Rank and Key Picks
EMCOR (EME) currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Construction Sector include Orion Group Holdings, Inc ORN, North American Construction Group Ltd NOA and Sterling Construction Company, Inc STRL, each sporting a Zack Rank #1.
Orions’ current year earnings are expected to rise 29.7%.
North American’s earnings surpassed estimates in the trailing four quarters, the average being 8.5%.
Sterling’s 2019 earnings are expected to rise 30.1%.
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