Can EMCOR's Prefabrication Drive Productivity and Margin Stability?

EMCOR Group, Inc. (EME) is advancing its operational strategy with a greater emphasis on prefabrication and design integration. The company has been expanding its prefabrication capacity across key construction segments to enhance productivity, safety and cost efficiency. Prefabrication has become an essential part of EMCOR’s project execution model, where Virtual Design and Construction (“VDC”) and Building Information Modeling (“BIM”) are used to refine designs before on-site work begins. This approach improves constructability, reduces rework and ensures quality across complex projects.

In the second quarter of 2025, the company highlighted that about 95% of its prefabrication work supports internal operations, helping lower on-site labor intensity and improve safety performance. Capital expenditure as a percentage of sales has more than doubled, with most of the spending directed toward prefabrication facilities and automation assets. These include fire life safety, sprinkler fabrication and large-scale electrical and piping systems that support data center, industrial and healthcare projects.

The focus on prefabrication, along with strong supervision and disciplined project planning, has supported notable margin gains. In the second quarter of 2025, EMCOR reported a record operating margin of 9.6%, an improvement of 50 basis points from the prior year. The company expects full-year margins between 9% and 9.4%, up from 8.5-9.2%, signaling confidence in continued execution. Prefabrication has become a stabilizing factor, helping EMCOR manage labor challenges while maintaining consistent execution and margin stability.

Peer Focus on Expanding Margins

Margin expansion has also been a key focus for infrastructure peers. MasTec, Inc. (MTZ) and Sterling Infrastructure, Inc. (STRL) have both demonstrated stronger profitability, supported by operational efficiency and a favorable project mix.

MasTec delivered improved profitability in the second quarter of 2025, supported by margin expansion across its non-pipeline segments. Communications, Power Delivery and Clean Energy & Infrastructure remained key growth drivers, benefiting from rising demand in telecom, grid modernization and renewables. Non-pipeline EBITDA rose 42% year over year to $257 million, with overall margins up 100 basis points. Backed by strong project visibility, MasTec expects further margin gains in the second half of 2025.

Sterling Infrastructure also showed strong profitability in the second quarter of 2025, driven by higher margins and solid execution. Adjusted EPS rose 41% year over year to $2.69, while gross profit margin expanded 400 basis points to 23.3%, marking a new high for the company. The improvement reflected a shift toward higher-margin E-Infrastructure projects, including data centers and e-commerce facilities. Backed by this performance, Sterling Infrastructure raised its full-year 2025 adjusted EPS guidance to a range of $9.21-$9.47, up 8% at the midpoint.

EME’s Price Performance, Valuation & Estimates

Shares of EMCOR have gained 73.6% in the past six months compared with the Zacks Building Products - Heavy Construction industry’s growth of 70.6%.

From a valuation standpoint, EME trades at a forward 12-month price-to-earnings ratio of 25.46X, up from the industry’s 22.95X.

EMCOR’s earnings estimates for 2025 and 2026 have trended upward in the past 30 days. The estimated figures for 2025 and 2026 indicate 17.1% and 7.5% year-over-year growth, respectively.

EME’s Zacks Rank

EMCOR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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