Opinions
Gordon Reid
EMCOR Group
EME-N
TOP PICK
Jul 23, 2020
Provide mechanical, electrical, and building services for construction sites. Trades at a reasonable multiple of 13x earnings. Cash rich. Free cash flow yield is pushing a robust 10%. Great balance sheet, with debt to capital of 20%. Will benefit from infrastructure stimulus. Yield is 0.50%. (Analysts’ price target is $68.75)
$64.485
Stock price when the opinion was issued
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TOP PICK
In the mechanical/construction services business so they are very much part of the stimulus program. Only a third of stimulus money has been spent so 2010-2011 should be a good time for them. Trading at about 12X 2010 estimates. Very little debt. Have $10 a share in cash on the balance sheet. Have had 10 consecutive quarters of earnings surprises.
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PAST TOP PICK
(A Top Pick Oct 17/19, Down 20%) An industrial services company for major projects. They provide services in hydraulics, electrical, communications, etc. With the economy slowing down and projects being differed, it has stalled. Once infrastructure programs begin, if a Democratic administration takes over, they are well positioned.
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BUY
EME vs. PWR
He owns EME instead of Quanta Services. On a 5-year chart, PWR has outperformed. But on a 1-year chart, EME is ahead. At 28x earnings, the multiple on PWR is about 50% higher than its normalized range, so it's not as good a value today. He'd switch into EME. EME has better profitability metrics, EPS revisions are better, PE is 20x earnings.
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