Can EMCOR Maintain Its 9.1% Margin Streak as Data Centers Explode?

EMCOR Group, Inc. EME is gaining from the strength witnessed across the network and communications sector, mainly driven by increased data center construction project momentum. The company is increasingly serving data-center customers across electrical, mechanical and fire-life safety scopes, allowing it to capture greater wallet share per site while spreading fixed overhead more efficiently. As of Sept. 30, 2025, Remaining Performance Obligations (RPOs) were $12.61 billion, indicating 29% year-over-year growth, with the networking and communications sector contributing about $4.3 billion to the value.

Owing to strong execution, disciplined project selection and a surge in data-center demand that is reshaping its backlog and revenue mix, EMCOR posted 9.1% of operating margin during the first nine months of 2025, with 9.4% reported in the third quarter. For 2025, EME now expects operating margin in the range of 9.2-9.4% compared with the previous expectation of 9-9.4%.

Notably, margin durability, however, depends less on demand and more on execution. EME continues to leverage prefabrication, Virtual Design and Construction (VDC) and Building Information Modeling (BIM) to keep labor hours growing far slower than revenues, while maintaining pricing discipline through careful contract negotiation and project mix management.

Investments in new geographies, workforce ramp-ups and backlog amortization from acquisitions such as Miller Electric and John W. Danforth can create short-term headwinds. However, in the long term, these investments are designed to build long-term scale and productivity in high-growth markets. Summing up, exploding data-center demand is not diluting EMCOR’s margin profile; rather, it is testing it. So far, execution suggests EMCOR is passing that test, though sustaining 9.1% will require continued discipline as scale and complexity increase.

EMCOR Stock’s Price Performance vs. Other Market Players

Shares of this Connecticut-based infrastructure service provider have gained 28.7% in the past six months, underperforming the Zacks Building Products - Heavy Construction industry, but outperforming the broader Construction sector and the S&P 500 index.

Other renowned firms that share the market space with EMCOR include Quanta Services, Inc. PWR and AECOM ACM, competing in the public infrastructure market, especially for data center projects. Although the favorable market trends are favoring these companies, they are falling behind in realizing benefits from the robust fundamentals compared with EME. During the past six months, shares of Quanta have gained 21.6% while those of AECOM have tumbled 10.9%.

EME’s Valuation Trend

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 22.85, as evidenced by the chart below.

Notably, Quanta and AECOM are currently trading at a forward 12-month P/E ratio of 35.61 and 17.12, respectively.

Earnings Estimate Revision of EME

EME’s earnings estimates for 2025 and 2026 have trended upward in the past 60 days to $25.24 and $27.41 per share, respectively. The revised estimates for 2025 and 2026 imply year-over-year growth of 17.3% and 8.6%, respectively.

EMCOR stock currently carries a Zacks Rank #3 (Hold). 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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