EMCOR Group, Inc. EME has faced challenges in its Building Services segment, mainly from weakness in site-based operations. Contract losses and reduced activity weighed on results and the business recorded four consecutive quarters of organic revenue declines. This left the segment under pressure and highlighted the need for improvement elsewhere.
In the second quarter of 2025, the picture started to shift. Building Services revenues rose 1.6% year over year to $793.2 million, marking the first sign of growth after the period of declines. The improvement was driven by Mechanical Services, which delivered mid-single-digit growth supported by demand for HVAC projects, retrofits and repair work. These shorter-cycle and recurring projects provided steadier contributions, offsetting site-based weakness.
Mechanical Services also lifted earnings quality within the segment. Operating margin for Building Services increased to 6.3%, up 30 basis points from the prior year. The segment benefited from higher volumes in HVAC and retrofit projects, which tend to deliver stronger margins compared with site-based contracts. The company highlighted this as evidence that the segment has “turned a corner,” with Mechanical Services at the center of that shift.
However, sustaining this progress will depend on continued demand for retrofit and service activity. Ongoing strength in these areas could offset lingering softness in site-based operations and position the Building Services segment for more consistent expansion.
Mechanical and Service Momentum Drives Sector Growth
Strength in mechanical contracting and service-driven projects is fueling momentum in the construction and building services space. Comfort Systems USA, Inc. FIX and Sterling Infrastructure, Inc. STRL are seeing strong demand tied to HVAC, retrofit and mission-critical projects.
Comfort Systems reported another quarter of double-digit revenue growth, supported by rising demand in mechanical and HVAC services. Backlog climbed to a record level, reflecting customer investment in retrofit and energy-efficient upgrades. The company also achieved margin expansion in its mechanical segment, underscoring the profitability of shorter-cycle and recurring service projects.
Sterling Infrastructure delivered 21% year-over-year revenue growth in the second quarter of 2025, led by its E-Infrastructure Solutions segment. Backlog increased 24% to $2 billion, with data centers and manufacturing projects as key contributors. Sterling is also set to expand further with the planned acquisition of CEC Facilities Group, which will add electrical and mechanical services and deepen exposure to higher-margin projects.
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EMCOR Group, Inc. (EME): Free Stock Analysis Report Comfort Systems USA, Inc. (FIX): Free Stock Analysis Report Sterling Infrastructure, Inc. (STRL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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