With growing industrial activities worldwide, the simultaneous requirements for operational improvements and maintenance services are poised to keep the industrial services market buoyed in the foreseeable future.
Amid this backdrop, let us probe into industrial services stocks EMCOR Group, Inc. (EME), IES Holdings, Inc. (IESC), and Limbach Holdings, Inc. (LMB), which could be wise additions to one’s portfolio now.
Before delving deeper into the fundamentals of these stocks, let us briefly discuss what’s shaping the industrial services sector’s prospects.
Industrial firms are the lifeblood of an economy. The difficulties triggered by geopolitical tensions, macroeconomic headwinds, and fears of economic slump placed the manufacturers in a tight spot in the recent past. Therefore, to counteract such challenges and bolster domestic manufacturing, significant steps are being taken by the federal government.
Moreover, the rising adoption of cutting-edge technologies such as robotics, automation, and the Internet of Things (IoT) could provide better efficiency and productivity, improve companies’ bottom lines, and ultimately bolster a modern industrial revolution.
As industrial activities expand, there is an increasing demand for predictive maintenance services and improved operational excellence, where industrial service providers play a significant role.
Industrial services are the services that businesses supply to industries when they are required, such as engineering and consulting, maintenance, and installation. The global industrial services market is expected to grow to $40.75 billion in 2027 at a CAGR of 5.2%.
To capitalize on the tailwinds, fundamentally strong industrial services stocks, EME, IESC, and LMB, could be wise portfolio additions in July.
EMCOR Group, Inc. (EME)
EME provides electrical and mechanical construction, facilities management, and maintenance services for various systems, including electrical power, energy solutions, instrumentation, communication, HVAC, fire protection, plumbing, water treatment, and steel fabrication.
On April 6, EME announced that its Board of Directors had declared a regular quarterly dividend of $0.18 per common share, paid to stockholders on April 28, 2023. EME pays a $0.72 per share dividend annually, which translates to a 0.39% yield on the current share price.
Its four-year average dividend yield is 0.41%. The company’s dividend payouts have grown at a CAGR of 24% over the past three years and 13.8% over the past five years.
EME’s revenue grew at 6.9% and 8.1% CAGRs over the past three and five years, respectively. In addition, its EBITDA and net income grew at CAGRs of 8.9% and 10.6% over the past three years, respectively.
EME’s trailing-12-month ROCE, ROTC, and ROTA of 21.15%, 14.44%, and 7.87% are 52.9%, 106.3%, and 53.9% higher than the industry averages of 13.83%, 7%, and 5.12%, respectively. Its trailing-12-month asset turnover ratio of 2.09x is 162.1% higher than the industry average of 0.80x.
EME’s total revenue increased 11.5% year-over-year to $2.89 billion for the fiscal first quarter that ended March 31, 2023. Its gross profit increased 23.7% from the year-ago value to $436.06 million. Moreover, the company’s net income and earnings per share increased 51.9% and 66.9% year-over-year to $111.47 million and $2.32, respectively.
The consensus revenue and EPS estimates of $3.10 billion and $2.50 for the fiscal third quarter ending September 2023 represent 9.6% and 15.5% increases year-over-year, respectively. It surpassed EPS and revenue estimates in each of the trailing four quarters, which is impressive.
EME’s shares have gained 79.4% over the past year to close its last trading session at $184.78. Over the past six months, the stock has gained 24.8%.
EME’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
EME has a B grade for Growth, Momentum, Sentiment, and Quality. It is ranked #6 out of 81 stocks within the B-rated Industrial – Services industry.
Click here for the additional POWR Ratings for Value and Stability for EME.
IES Holdings, Inc. (IESC)
IESC designs and installs integrated electrical and technology systems and provides infrastructure products and services in the United States. The company operates through four business segments: Commercial & Industrial; Communications; Infrastructure Solutions; and Residential.
In December 2022, IESC’s Board of Directors authorized and announced a stock repurchase program for purchasing up to $40 million of its common stock from time to time. During the quarter that ended March 31, 2023, the company repurchased 4,048 shares at an average price of $34.97 per share under the repurchase programs.
IESC’s revenue grew at 26.8% and 23.3% CAGRs over the past three and five years, respectively. In addition, its EBITDA and net income grew at CAGRs of 31.4% and 27.5% over the past three years, respectively.
IESC’s trailing-12-month ROCE, ROTC, and ROTA of 17.11%, 12.39%, and 8.29% are 23.7%, 77%, and 61.91% higher than the industry averages of 13.83%, 7%, and 5.12%, respectively. Its trailing-12-month asset turnover ratio of 2.71x is 239.2% higher than the industry average of 0.80x.
IESC’s revenues increased 13.4% year-over-year to $568.90 million for the fiscal second quarter that ended March 31, 2023. The company’s gross profit grew 72.5% from the prior-year period to $100.90 million.
Its operating income came in at $31.60 million, compared to an operating loss of $4.90 million in the prior-year quarter. Also, its adjusted EBITDA rose significantly year-over-year to $36.90 million.
In addition, the adjusted net income attributable to IESC and adjusted earnings per share attributable to common stockholders stood at $24.60 million and $1.07, compared to an adjusted net loss and adjusted loss per share of $6.60 million and $0.36, respectively, in the previous year’s quarter.
Over the past six months, the stock has gained 59.9% to close the last trading session at $56.88. It has gained 85.3% over the past year.
IESC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
IESC has an A grade for Growth and a B for Value, Momentum, Stability, and Quality. It is ranked first within the same industry.
In addition to the POWR Ratings highlighted above, one can see IESC’s ratings for Sentiment here.
Limbach Holdings, Inc. (LMB)
LMB operates as an integrated building systems solutions company in the United States. It operates in two segments, General Contractor Relationships and Owner Direct Relationships.
LMB’s trailing-12-month asset turnover ratio of 1.79x is 124.4% higher than the 0.80x industry average. Its trailing-12-month levered FCF margin and ROTC of 9.23% and 8.25% are 76% and 17.9% higher than the 5.24% and 7% industry averages, respectively.
LMB’s EBITDA grew at 31.3% and 16.6% CAGRs over the past three and five years, respectively. In addition, its EBIT and tangible book value grew at CAGRs of 49.5% and 36.3% over the past three years, respectively.
During the fiscal first quarter (ended March 31, 2023), LMB’s revenue increased 5.4% year-over-year to $121.01 million, while its gross profit came in at $26.23 million, up 43% year-over-year. The company’s operating income for the quarter stood at $4.65 million, compared to an operating loss of $793 thousand in the year-ago quarter.
LMB’s net income and earnings per common share came in at $2.99 million and $0.27, compared to net loss and loss per common share of $1.52 million and $0.15, respectively, in the previous-year quarter. Moreover, its cash, cash equivalents, and restricted cash grew 128.2% year-over-year to $41.49 million in the same quarter.
LMB’s EPS is expected to come at $0.31 for the fiscal third quarter ending September 2023. The company’s revenue for the same quarter is expected to increase 2.2% year-over-year to $125 million. Also, it surpassed EPS estimates in each of the trailing four quarters.
Shares of LMB have gained 369.3% over the past year to close its last trading session at $24.73. Over the past six months, the stock has gained 137.6%.
It’s no surprise that LMB has an overall rating of A, which translates to a Strong Buy in the POWR Ratings system.
The stock has an A grade for Growth, Sentiment, and Quality and a B in Value and Momentum. It is ranked #2 within the same industry.
Beyond what is stated above, we have also rated LMB for Stability. Get all LMB ratings here.
What To Do Next?
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EME shares were trading at $183.60 per share on Monday morning, down $1.18 (-0.64%). Year-to-date, EME has gained 24.23%, versus a 16.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.3 Industrial Service Stocks to Buy in July appeared first on StockNews.com