Can EMCOR's Healthcare and Pharma Projects Drive Future Upside?

Besides data center construction projects, EMCOR Group, Inc. EME is witnessing growing demand in the healthcare and pharma-related projects. These trends are substantiated by the company’s performance in the first half of 2025.

During the first six months of 2025, the Healthcare market sector contributed 10% (up from 7% from a year ago) to EMCOR’s United States electrical construction and facilities services revenues and 9% (flat year over year) to the United States mechanical construction and facilities services revenues. During the said time frame, the Healthcare market sector’s revenues under the electrical construction and facilities services segment grew 110% year over year to $241.4 million, boosting this segment’s revenue contribution.

Additionally, as of June 30, 2025, the Healthcare market sector’s remaining performance obligations (RPOs) totaled $1.4 billion, driven by strong market demand patterns and expanded opportunities resulting from the Miller Electric acquisition. Notably, healthcare offers EME a diversified revenue stream, which is expected to balance out the instability caused by other sectors like data centers, institutional and industrial, over time.

With the recent Fed rate cut by 0.25 percentage points, pulling down the benchmark to the range of 4.00-4.25%, and optimism surrounding the expectations of two more rate cuts in 2025, it bodes well for EMCOR as well. Although market risks, such as high input costs, regulatory compliance, tariff-related uncertainties and competitive pressures, will loom over EME, the positive attributes are expected to balance them out. With the interest rates lowering and market trends for the healthcare sector growing, the company is well-positioned to cash out from this sector in the mid and long term.

EMCOR Facing Competitive Pressures

EMCOR faces substantial competition in the healthcare market sector from renowned names like Comfort Systems USA, Inc. FIX and AECOM ACM, given the current rising demand in healthcare infrastructure projects.

Comfort Systems has explicitly noted that healthcare and institutional markets now contribute about 24% of its revenues, and its backlog has surged with healthcare being one of the high-margin sectors. While Comfort Systems has strong specialization and modular or off-site construction capability, EMCOR’s size, spread and financial strength give it resilience and the ability to take on large-scale contracts.

On the other hand, AECOM, although more diversified in infrastructure, design and large-scale public works, also participates in healthcare facility engineering and contracting, with a large and rising backlog, providing it with scale and capacity. Compared with AECOM, EMCOR is more focused on the kinds of system-installation, MEP (mechanical/electrical/plumbing) and operational services that are critical in healthcare facilities, which often demand complex, specialized contracting rather than just design or planning.

EME Stock’s Price Performance & Valuation Trend

Shares of this Connecticut-based infrastructure service provider have gained 54.7% in the past six months, outperforming the Zacks Building Products - Heavy Construction industry, the broader Construction sector and the S&P 500 index. The detailed share price performance is shown in the chart below.

EME stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 23.31, as evidenced by the chart below. The overvaluation of the stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up.

Earnings Estimate Revision of EME

EME’s earnings estimates for 2025 and 2026 have trended upward in the past seven days to $25.11 and $27.00 per share, respectively. The revised estimated figures for 2025 and 2026 imply year-over-year growth of 16.7% and 7.5%, respectively.

EMCOR stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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