EMCOR Group, Inc. (EME) Earnings

Management highlights

- Core Overall Performance * MCOR delivered an outstanding Q2 2026 with 19.8% total revenue growth ($5.15 billion total revenue) and 19.6% organic revenue growth YoY * Operating income hit $547.3 million (up nearly 32% YoY) with a 10.6% operating margin (up 100 basis points YoY, a Q2 record); diluted EPS grew 35% YoY to $9.06 * Record Remaining Performance Obligations (RPOs) of $17.14 billion, up 44% YoY, 29% from December 2025, and 10% sequentially, with 95% of RPO growth organic. Strong demand is driven by AI infrastructure and digital transformation investments in data centers, plus broad growth in water/wastewater, healthcare, and institutional sectors * The company leverages prefabrication, Virtual Design and Construction (VDC), disciplined labor management, and advanced project planning to deliver safe, efficient project execution - Acquisition and Capital Allocation Strategy * MCOR completed 5 new targeted acquisitions in Q2 2026: B&B Electric (Wisconsin), Sidney Electric (Ohio), Jowls (Daytona Beach, FL), Schmidt Electric (Central Texas/Austin), and Conley Electric (Chicagoland area). All five will join the Electrical Construction segment * The acquisitions collectively generated $625 million in trailing 12-month revenue and $105 million in EBITDA as of June 30, 2026. Acquisition strategy prioritizes: proven field execution capability, alignment with MCOR's values, and ability to pivot existing capabilities to high-growth data center end markets to drive incremental growth * MCOR maintains a balanced capital allocation strategy: investing in organic growth, pursuing strategic acquisitions that expand geographic reach and core capabilities, and returning capital to shareholders, while maintaining a strong balance sheet with $924 million in cash on hand and $1.45 billion in working capital - Core Competitive Advantages * Sustained competitive advantages built on four enduring fundamentals: commitment to training/innovation/safety, disciplined contract risk management, exceptional experienced field leadership, and long-standing disciplined capital allocation

Guidance

- MCOR substantially raised full year 2026 guidance driven by strong first half 2026 performance and record RPO visibility - Updated full year 2026 guidance expects total revenue between $20.0 billion and $20.5 billion - Updated full year 2026 diluted EPS guidance is between $32.00 and $33.25 - The five new acquisitions are expected to contribute between $250 million and $275 million in revenue in the back half of 2026; near-term diluted EPS impact is limited due to acquisition-related intangible amortization, with full accretion expected over 12-18 months as amortization rolls off - Guidance assumes continued strong demand across core end markets, disciplined project execution, and pricing discipline; margin guidance reflects SG&A leverage from accelerated revenue growth, with full year 2026 back half margins expected to be broadly comparable to the first half of 2026 collectively

Segment performance

1. Electrical Construction: Q2 2026 revenue of $1.66 billion, representing 24% year-over-year growth, accounting for ~32.2% of total consolidated revenue. Operating income reached $231.4 million (up 46.8% YoY), with an operating margin of 13.9% (expanded 210 basis points YoY). Growth was driven primarily by 45% revenue growth in network/communications (data center) projects. 2. Mechanical Construction: Q2 2026 revenue of $2.3 billion, representing 31% year-over-year growth, accounting for ~44.7% of total consolidated revenue. Operating income reached $286.6 million (up 20.1% YoY), with an operating margin of 12.5% (down 110 basis points YoY from mix shift, in line with historical 12/24-month averages). The segment saw more than 100% YoY revenue growth in network/communications, plus 77% growth in institutional, 26% in commercial, and 18% in manufacturing/industrial. 3. U.S. Building Services: Q2 2026 revenue of $837.7 million, representing 5.6% year-over-year growth, accounting for ~16.3% of total consolidated revenue. Operating income reached $63.4 million (up 26.6% YoY), with an operating margin of 7.6% (expanded 130 basis points YoY). Growth came from mechanical services (broad-based strength across service lines) and commercial site-based services (new contracts and scope expansion with existing customers), with restructuring benefits from prior year actions. 4. Industrial Services: Q2 2026 revenue of $353.8 million, representing nearly 26% year-over-year growth, accounting for ~6.9% of total consolidated revenue. Operating income was $9.6 million, a significant improvement from the year-ago period, driven by higher activity in field services (turnaround work, petrochemical projects, and progress on a large solar project). Combined construction segments generated $3.96 billion in total revenue (up 28% YoY, a new quarterly record) with combined operating income up over 30% YoY and a combined operating margin of 13.1% (up 30 basis points YoY).

Risks & headwinds

- Ongoing macroeconomic uncertainties including geopolitical conflicts, commodity cost fluctuations, and volatile equipment lead times - State and local proposals for data center development moratoriums/bans driven by local opposition and power infrastructure concerns, which could shift project locations - Mix shift toward lower-margin contract types (GMP/Cost Plus contracts and prime/construction manager roles) on large projects, particularly in mechanical construction, which creates moderate downward pressure on segment margins - Demand balancing tradeoffs: in some geographic markets, higher near-term earnings from data center projects may crowd out semiconductor/high-tech manufacturing work in the short term

Analyst Q&A

• Q: What is the current demand profile for data centers, and how much has contract mix shifted to GMP versus fixed-price contracts?

  A: Management reports no change in sustained strong data center demand, with growth focused in markets with available power infrastructure (Ohio, Texas, Arizona, Northern Virginia, the Carolinas, Georgia, and Northwest Indiana). Contract mix for mechanical construction has shifted roughly 9-10% toward GMP contracts, driven primarily by the complexity of new AI data center mechanical systems, which makes GMP contracting prudent for both owners and MCOR.

• Q: What is MCOR's strategy for its recent acquisition pipeline, and what are its M&A priorities going forward?

  A: MCOR's current M&A pipeline remains strong. The company prioritizes add-on acquisitions that augment existing geographic and technical capabilities in core mechanical and electrical construction, focusing on targets with proven field execution, shared values, and the ability to pivot into high-growth data center end markets adjacent to their existing footprint. Management avoids entering unfamiliar sectors, noting there is still ample white space for growth in core businesses, and targets cumulative, compounding long-term growth from multiple small-to-mid sized acquisitions.

• Q: How does MCOR's labor flexibility work to accommodate shifts in data center project locations due to local moratoriums?

  A: As a union contractor, MCOR benefits from existing mobility of union tradespeople, who commonly travel for projects, receive per diem, and integrate with local union halls to start work quickly. In rural markets, MCOR uses higher prefabrication to reduce on-site labor needs, and is open to flexible operating models (including temporary non-union participation or targeted non-union operations in rural markets) to meet demand. Management also notes that data centers generate substantial local tax revenue, which reduces the long-term likelihood of sustained bans in most markets.

• Q: Why did MCOR raise full year guidance despite mechanical margin pressure and acquisition amortization?

  A: Accelerated revenue growth has driven better absorption of both indirect cost of sales and SG&A overhead, creating operating leverage that outweighs incremental drag from mix shifts and acquisition accounting. Stronger than expected execution in electrical construction, plus greater contribution from building services and industrial services in the first half, gave management confidence that the second half will perform in line with the first half of 2026.