Dive Brief:

• Emcor Group grew its U.S. building services business a record 4.7% year over year to $852 million in the third quarter, despite taking a non-cash impairment on an energy-efficiency performance contracting subsidiary, executives said on the company’s earnings call Oct. 29.
• “We continue to see strength within mechanical services, which experienced growth across each of its service lines, including service repair and maintenance, building automation and controls, and retrofit projects,” Jason Nalbandian, Emcor senior vice president and CFO, said on the call.
• The site-based segment of its building services division, in which Emcor bases technicians at a client’s facility rather than making service calls, grew revenues by 6.5%, which Nalbandian attributed to new facility maintenance contracts. “Scope or site expansion with existing customers” also drove the gains, he said.

Dive Insight:

Driven by growth in its core mechanical and electrical construction contracting business, Emcor’s revenue increased 28.8% to $5.5 billion, according to the company’s earnings presentation.  

Data centers fueled much of the gain but the company is seeing business increase in all facility types, according to Tony Guzzi, Emcor chairman, president and CEO. 

“Demand remains broad-based,” he said. “Particular strength [is seen] in the network and communications — which is data centers for the most part — healthcare, manufacturing and industrial, water and wastewater, and institutional sectors.”

Revenues for its electrical construction and facility services segment were $1.85 billion, up 44.3%, and for mechanical construction, $2.55 billion, up 43.1%, in both cases driven mostly by data center work.    

Future business, which the company measures on the basis of remaining performance obligations, or RPOs, also looks strong in most of the sectors Emcor competes in, according to company data.  

Data center RPOs totaled $8.74 billion, more than double what it was a year ago, a record, Guzzi said. “This growth demonstrates our broad capabilities in this sector, which includes electrical, mechanical, and fire life safety, construction, and service,” he said.   

RPOs are strong in all facility types with the exception of commercial buildings, which were down 1-2%, Guzzi said without suggesting what’s behind the dip. 

Guzzi called the double-digit gains in all of the other sectors “stunning.” The company saw revenue jump up 31% in healthcare, 38% in water and wastewater, 25% in institutions and 10% in industrial.

“We have built in diversity of demand because not all our end markets, not all our geographic markets, have data center capability,” he said. 

The company has been deploying what Guzzi called novel solutions to manage its growth in data centers as an MEP contractor despite widespread shortages in skilled labor. In areas where it's taking new data center business, he said, it’s giving technicians working in its core segments incentives to do additional work on data centers.

“We have been able to do very creative things with our workforce,” he said. “They will work on those [core] sites four or five days a week, and if they want to pick up overtime, they can come over on a scope of work and work on the data center site on the weekend.” 

Emcor hasn't been impacted by the data center backlash, Guzzi said. Its pipeline involves projects approved for several years already. Going forward, the backlash could subside as people come to understand more about the projects and the benefits they bring.  

“The whole thing's been full of misinformation,” he said. “I venture to say this. I think if you put the tax benefits that's happening as a result of these data centers and put 100 school superintendents in a market with the local people, I think when they understood what's available to them and how it can really allow them to build the schools, pay the teachers and the cops and the firefighters, and build out world-class facilities like they've done in Loudoun County [in Virginia] and like they've done in Louisiana [and] like they've done in other markets we serve, I think you'll find that these things will get built.”

Emcor’s building services results include a $34 million non-cash intangible asset impairment charge associated with an acquisition it made to buttress its position in the energy-efficiency performance contracting business. Executives didn’t identify the company that was acquired, but Emcor in 2023 acquired ECM Holdings, which provides energy-efficiency performance contracting. 

 “This business … has been affected by disruption in the performance contracting market,” said Nalbandian, adding that it accounts for 1% of its building services revenue.

Global HVAC manufacturer Carrier Corp. in July divested one of ECM’s competitors, Noresco. "The sale of Noresco represents Carrier's continued commitment to portfolio simplification," Carrier CEO David Gitlin said at the time. Opterra, another energy-efficiency performance contracting company, acquired Noresco for an undisclosed amount.