EMCOR GROUP, INC.
REPORTS THIRD QUARTER 2017 RESULTS
- Record Quarterly Diluted EPS from Continuing Operations of $1.09 -
- Total Backlog of $3.96 Billion; 1.5% Increase Year-over-Year -
- Maintains 2017 Revenue Guidance and Raises 2017 Diluted EPS Guidance Range -
- Board Authorizes an Additional $100 Million Share Repurchase Program -
NORWALK, CONNECTICUT, October 26, 2017 - EMCOR Group, Inc. (NYSE: EME) today reported results for the third quarter ended September 30, 2017.
For the third quarter of 2017, net income from continuing operations attributable to EMCOR was $64.8 million, or $1.09 per diluted share, compared to $51.9 million, or $0.85 per diluted share, for the third quarter of 2016. Revenues for the third quarter of 2017 were $1.89 billion compared to $1.92 billion for the third quarter of 2016.
Operating income for the third quarter of 2017 was $106.5 million, or 5.6% of revenues, compared to $86.1 million, or 4.5% of revenues, in the year ago period.
Selling, general and administrative expenses for the third quarter of 2017 totaled $188.6 million, or 10.0% of revenues, compared to $181.4 million, or 9.4% of revenues, in the third quarter of 2016.
The Company's income tax rate for the third quarter of 2017 was 37.3%, compared to an income tax rate of 37.2% in the year ago period.
Backlog as of September 30, 2017 was $3.96 billion, an increase of 1.5% from $3.90 billion at the end of the third quarter of 2016. Total domestic backlog grew $48.6 million year-over-year and backlog in the U.K. segment increased $11.9 million. Backlog growth in the U.S. Electrical Construction, U.K. Building Services and U.S. Industrial Services segments more than offset declines in the U.S. Mechanical Construction and U.S. Building Services segments. From an end-market perspective, backlog growth in the commercial, healthcare, hospitality and institutional sectors was partially offset by declines in the industrial, transportation and water & wastewater sectors.
Tony Guzzi, President and Chief Executive Officer of EMCOR, commented, “The Company delivered record quarterly diluted earnings per share, achieving nearly 30% growth year-over-year. This was driven by broad-based strength across end-markets and geographies. We also saw record quarterly operating income, driven by higher levels of profitability and margin expansion in every segment except U.S. Industrial Services, which was impacted by Hurricane Harvey. We also continued to generate solid operating cash flow, delivering $238 million in the first nine months of 2017, up 84.8% year-over-year.”
Mr. Guzzi added, “Our strong profitability in the quarter was led by our U.S. Electrical Construction and U.S. Mechanical Construction segments, which posted operating income growth of 50.6% and 47.8% year-over-year, respectively. Their combined operating margin of 8.5% represents an expansion of 240 basis points, primarily as a result of strong project execution. Additionally, our U.S. Building Services segment delivered double-digit operating income growth, driven by solid performance in the mobile mechanical services and commercial site-based services businesses within this segment. In our U.S. Industrial Services segment, we faced a difficult comparison due to a large specialty services project in the year ago quarter. This segment was further impacted by the recent hurricane, which led to a delay in our fall turnaround work and the under absorption of overhead costs for projects that we were unable to execute on, resulting in an unusual segment operating loss in the third quarter of 2017. Our U.K. segment saw revenue growth of 17.6% and a 51.8% increase in operating income. This strong performance was driven by profitable new contracts, solid execution in our base business and the absence of negative foreign exchange fluctuations.”
Revenues for the first nine months of 2017 totaled $5.67 billion, an increase of 1.3% compared to $5.60 billion for the first nine months of 2016. Net income from continuing operations attributable to EMCOR for the first nine months of 2017 was $174.7 million, or $2.93 per diluted share, compared to $142.8 million, or $2.33 per diluted share, for the first nine months of 2016. Included in net income from continuing operations attributable to EMCOR for the first nine months of 2016 were after-tax transaction expenses of $2.3 million, or $0.04 per diluted share, related to the acquisition of Ardent. Excluding these transaction expenses, non-GAAP net income from continuing operations attributable to EMCOR for the first nine months of 2016 was $145.2 million, or $2.37 per diluted share.
Operating income for the first nine months of 2017 was $282.1 million, or 5.0% of revenues, compared to $234.0 million, or 4.2% of revenues, for the first nine months of 2016. Included in operating income for the first nine months of 2016 were pre-tax transaction expenses of $3.8 million related to the acquisition of Ardent. Excluding these transaction expenses, non-GAAP operating income for the first nine months of 2016 was $237.8 million, or 4.2% of revenues. SG&A totaled $552.9 million, or 9.7% of revenues, for the first nine months of 2017 compared to $530.7 million, or 9.5% of revenues, for the first nine months of 2016.
Mr. Guzzi concluded, “We are very pleased with our third quarter performance and encouraged by the year-over-year growth in backlog. Our updated guidance reflects our year-to-date results and the expectation for sustained strength in our U.S. Construction segments, as well as our limited visibility with respect to the timing of turnaround work in our U.S. Industrial Services segment. Our confidence in our long term outlook is underscored by today’s announcement that the Board has authorized a new repurchase program. This is a reflection of our strong cash flow and healthy balance sheet, which provide us with the flexibility to continue to return capital to shareholders through share buybacks and dividends, while pursuing incremental growth through strategic acquisitions."
Based on the current size and mix of backlog and current market conditions, EMCOR maintains its full year 2017 revenue guidance of approximately $7.6 billion. The Company now expects full year 2017 diluted earnings per share from continuing operations to be in the range of $3.70 to $3.80, up from the previous range of $3.40 to $3.60.
Additional Share Repurchase Program
The Company also announced today that its Board of Directors has authorized a new share repurchase program for the Company to repurchase up to an additional $100 million of its outstanding common stock.
As of September 30, 2017, the Company has already repurchased $123 million of its outstanding common stock of its current $200 million share repurchase program launched in October 2015. The new share repurchase program will be funded from the Company’s operations. The shares will be repurchased from time to time in the open market or through privately negotiated transactions at the Company’s discretion, subject to market conditions, and in accordance with applicable regulatory requirements. The repurchase program has no expiration date and does not obligate the Company to acquire any particular amount of common stock and may be suspended, recommenced or discontinued at any time or from time to time without prior notice.
EMCOR Group, Inc. is a Fortune 500 leader in mechanical and electrical construction services, industrial and energy infrastructure and building services. This press release and other press releases may be viewed at the Company’s website at www.emcorgroup.com.
EMCOR Group's third quarter conference call will be available live via internet broadcast today, Thursday, October 26, at 10:30 AM Eastern Daylight Time. The live call may be accessed through the Company's website at www.emcorgroup.com.
This release may contain certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995. Any such comments are based upon information available to EMCOR management and its perception thereof, as of this date, and EMCOR assumes no obligation to update any such forward-looking growth, gross profit, backlog mix, projects with varying profit margins, and selling, general and administrative expenses. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly these statements are no guarantee of future performance. Such risk and uncertainties include, but are not limited to, adverse effects of general economic conditions, changes in the political environment, changes in the specific markets for EMCOR’s services, adverse business conditions, availability of adequate levels of surety bonding, increased competition, unfavorable labor productivity and mix of business. Certain of the risk factors associated with EMCOR's business are also discussed in the Company's 2016 Form 10-K and in other reports filed from time to time with the Securities and Exchange Commission. All these risk factors should be taken into account in evaluating any forward-looking statements.