Why Emcor Group Plunged Today
Key Points
Emcor delivered double-digit growth above analyst expectations.
Remaining performance obligations grew even faster than revenue on the back of the AI data center buildout.
Still, near-term guidance wasn't enough for investors, who took profits after a 70% rise in the stock this year.
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Shares of construction services provider Emcor Group (NYSE: EME) had plunged 17% on Thursday by 12:35 p.m. ET.
Emcor is a large-cap, diversified provider of construction services, and it has caught fire this year on the back of demand for artificial intelligence (AI) data centers, which has bolstered its electrical services segment.
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Despite beating analyst expectations on both the top and bottom lines this morning, Emcor fell, as its forward guidance wasn't enough to satisfy investors after a 70% run in the stock in 2025.
Emcor sees the perils of high expectations
In the third quarter, Emcor grew revenue 16.4% to $4.3 billion, while earnings per share (EPS) grew slightly slower at 13.3% to $6.57. Both figures beat analysts' expectations, despite the slight margin compression. The star of the show was Emcor's Electrical Construction & Facilities Services segment, which rocketed 52.1% in the quarter. All of Emcor's other segments grew in the low-to-mid-single digits.
So what was the problem? Likely, full-year guidance. For the year, management now expects between $16.7 billion and $16.8 billion in revenue, whereas last quarter's guidance was for between $16.4 billion and $16.9 billion, a wider range with a higher top limit. And while the company raised the bottom end of its EPS estimate range, it didn't increase the top end, keeping it at $25.75 despite the quarter's beat.
Another positive was remaining performance obligations, which are long-term contracts that have yet to be fulfilled. That figure grew 29% to an all-time high of $12.61 billion.
Still, it appears the near-term guidance was enough to cause a round of profit-taking in the high-flying stock.
Image source: Getty Images.
Emcor is a decent value
After today's plunge, shares trade at 25.6 times 2025 earnings estimates. That's not exactly cheap, but it's also not overly expensive for a company that stands to benefit from the demand for data centers.
Emcor's AI-exposed electrical segment made up about 31% of Emcor's U.S. operations -- the company is divesting its UK operations -- and as that segment makes up a greater portion of the business, overall growth should hold steady or perhaps even accelerate. This is a stock worth investigating to potentially buy on the dip.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends EMCOR Group. The Motley Fool has a disclosure policy.
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