Emcor Keeps Building

Emcor Group (EME ) could be a stock for all seasons. Despite a shaky economy, business is booming for the leader in mechanical and electrical construction services: In 2002, orders jumped 22%, to $2.9 billion, and earnings rose to $4.07 a share on sales of $3.9 billion, up from 2001's $3.40 on $3.4 billion. Emcor stock was stuck at 20 when featured in this column on Feb. 21, 2000. But it surged to 64 by May 6, 2002, even as the market plunged. The stock slipped this year, to 46, as Iraq worries mounted. Bulls say now is the time to buy. Analyst Alex Rygiel of investment firm Friedman, Billings, Ramsey rates the stock outperform, and notes it trades at a 15% discount to its peers "despite a record of yearly 38% earnings growth and 12% sales growth." He figures it will earn $4.60 a share in 2003 and $5.20 in 2004, and has a 12-month price target of 62.50.

"Neither a war nor slack in capital spending will slow our results," says CEO Frank MacInnis. Emcor's other business -- managing buildings for clients such as Bank One and Procter & Gamble -- offsets any weakness in construction, he says. Of 2003's expected $4.6 billion in revenues, building management brings in $1.2 billion, twice what it was three years ago, says MacInnis. Analyst Walter Kirchberger of UBS Warburg, who rates Emcor a buy, says its value will be driven by its ability to maintain consistent and predictable [earnings] and "a commitment to a conservative financial structure." UBS has done banking for Emcor.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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