8-KEarnings & ResultsExhibits & Filings

EMCOR Group, Inc. 8-K Report, Financial Results (Jul 27, 2006)

Filed July 27, 2006For Securities:EME

Summary

EMCOR Group, Inc. reported strong second-quarter 2006 results, marked by significant increases in both operating income and net income compared to the prior year period. Net income surged by 112.5% to $16.9 million, or $0.52 per diluted share, while revenues saw a more modest increase of 4.4% to $1.22 billion. This profitability improvement was driven by an increase in operating income margin to 2.1% from 1.3%, demonstrating enhanced operational efficiency. The company also achieved a record contract backlog of $3.22 billion, an 18.2% increase year-over-year, indicating robust future revenue potential. This backlog growth is particularly strong in the private sector commercial and hospitality segments, reflecting a strategic shift by EMCOR. Management expressed satisfaction with the quarter's performance, attributing it to solid execution across all business segments, including strong growth in the facilities services division. The company has strategically reduced exposure to certain public sector markets and focused on more profitable private and commercial sectors, a strategy that is now yielding positive results. Building on this momentum, EMCOR has raised its full-year 2006 guidance, now expecting revenues between $5.0 billion and $5.2 billion and diluted earnings per share between $1.90 and $2.10. Investors should note the impact of adopting FAS 123(R) on stock-based compensation, which reduced EPS by $0.04 in the quarter and is expected to reduce full-year EPS by $0.07.

Key Highlights

  • 1EMCOR's Q2 2006 net income increased by a significant 112.5% year-over-year, reaching $16.9 million or $0.52 per diluted share.
  • 2Operating income saw a substantial 72.6% increase, improving the operating margin to 2.1% from 1.3% in Q2 2005.
  • 3Total revenues for the second quarter grew by 4.4% to $1.22 billion.
  • 4The company reported a record contract backlog of $3.22 billion as of June 30, 2006, up 18.2% from the prior year.
  • 5The composition of the backlog has shifted, with private sector commercial and hospitality now representing 54% of the total, up from 34% a year ago.
  • 6EMCOR has raised its full-year 2006 guidance for both revenue and diluted EPS.
  • 7The adoption of FAS 123(R) for stock-based compensation had a negative impact of $0.04 per diluted share on Q2 2006 net income.

Frequently Asked Questions

For the second quarter of 2006, EMCOR reported a 112.5% increase in net income to $16.9 million ($0.52 per diluted share) and a 72.6% increase in operating income to $25.3 million. Revenues grew by 4.4% to $1.22 billion. The operating margin improved to 2.1%.

EMCOR achieved a record contract backlog of $3.22 billion as of June 30, 2006, an 18.2% increase year-over-year. This growth, particularly in the private sector commercial and hospitality segments (now 54% of the backlog), suggests strong future revenue potential and a successful strategic shift towards more profitable markets.

Yes, the adoption of FAS 123(R) (Accounting for Stock-Based Compensation) resulted in after-tax expenses of $1.3 million in the second quarter of 2006, reducing diluted earnings per share by $0.04. This is a new expense not present in the prior year period. The company also stated this adoption is expected to impact full-year 2006 EPS by $0.07.

Based on current market conditions, EMCOR has raised its full-year 2006 guidance. The company now expects revenues to be between $5.0 billion and $5.2 billion, with diluted earnings per share projected to be between $1.90 and $2.10. This guidance accounts for the previously mentioned FAS 123(R) expenses.