Let’s dig into the relative performance of EMCOR (NYSE:EME) and its peers as we unravel the now-completed Q3 engineering and design services earnings season.
Companies providing engineering and design services boast ever-evolving technical expertise. Compared to their counterparts who manufacture and sell physical products, these companies can also pivot faster to more trending areas due to their smaller physical asset bases. Green energy and water conservation, for example, are current themes driving incremental demand in this space. On the other hand, those providing engineering and design services are at the whim of construction and infrastructure project volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates.
The 5 engineering and design services stocks we track reported a strong Q3. As a group, revenues missed analysts’ consensus estimates by 1.2% while next quarter’s revenue guidance was 7.4% above.
Thankfully, share prices of the companies have been resilient as they are up 9.2% on average since the latest earnings results.
EMCOR (NYSE:EME)
Through its network of over 70 subsidiaries, EMCOR (NYSE:EME) provides electrical, mechanical, and building construction and services
EMCOR reported revenues of $3.70 billion, up 15.3% year on year. This print fell short of analysts’ expectations by 2.5%, but it was still a strong quarter for the company with an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ adjusted operating income estimates.
Tony Guzzi, Chairman, President, and Chief Executive Officer of EMCOR, commented, “Our team continued to perform exceptionally well and delivered another great quarter, maintaining our momentum and again setting new records across key financial and operational metrics. Record RPOs of $9.8 billion, along with a robust and diverse pipeline of future opportunities, demonstrates the continued demand for our services. Our record operating cash flow and strong and liquid balance sheet enable us to compete and win on sophisticated projects, and support our organic growth and balanced capital allocation strategy.”
EMCOR achieved the fastest revenue growth but had the weakest full-year guidance update of the whole group. Unsurprisingly, the stock is up 21% since reporting and currently trades at $522.11.
Best Q3: Dycom (NYSE:DY)
Working alongside some of the most popular mobile carriers in the world, Dycom (NYSE:DY) builds and maintains telecommunications infrastructure.
Dycom reported revenues of $1.27 billion, up 12% year on year, outperforming analysts’ expectations by 4.3%. The business had a stunning quarter with an impressive beat of analysts’ adjusted operating income estimates and revenue guidance for next quarter exceeding analysts’ expectations.
Dycom pulled off the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 9.6% since reporting. It currently trades at $183.24.
Is now the time to buy Dycom? Access our full analysis of the earnings results here, it’s free.
Weakest Q3: AECOM (NYSE:ACM)
Founded in 1990 when a group of engineers from five companies decided to merge, AECOM (NYSE:ACM) provides various infrastructure consulting services.
AECOM reported revenues of $4.11 billion, up 7% year on year, in line with analysts’ expectations. It was a mixed quarter as it posted full-year EPS guidance slightly topping analysts’ expectations but a miss of analysts’ adjusted operating income estimates.
Interestingly, the stock is up 4.2% since the results and currently trades at $113.78.
Read our full analysis of AECOM’s results here.
MasTec (NYSE:MTZ)
Involved in the 1996 Olympic Games MasTec (NYSE:MTZ) is an infrastructure construction company that specializes in the telecommunications, energy, and utility industries.
MasTec reported revenues of $3.25 billion, flat year on year. This result lagged analysts' expectations by 5.4%. Taking a step back, it was still a strong quarter as it put up a solid beat of analysts’ EPS estimates.
MasTec had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is up 17.2% since reporting and currently trades at $144.09.
Read our full, actionable report on MasTec here, it’s free.
Sterling (NASDAQ:STRL)
Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ:STRL) provides civil infrastructure construction.
Sterling reported revenues of $593.7 million, up 6% year on year. This print lagged analysts' expectations by 2.3%. In spite of that, it was a strong quarter as it produced an impressive beat of analysts’ EBITDA and EPS estimates.
Sterling delivered the highest full-year guidance raise among its peers. The stock is up 13.4% since reporting and currently trades at $199.
Read our full, actionable report on Sterling here, it’s free.
Market Update
In response to the Fed's rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed's 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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