From February 2020 to March 2020, the Emcor Group’s stock fell about 45%. The economic outlook at that time looked bleak for construction and mechanical services segments. However, since then, Emcor Group has risen more than 140%. Record-low interest rates have fueled the housing market, and construction activity has been hitting record highs. A lot of businesses are also making their way towards pre-pandemic levels, and economic activity is on the rebound in the US. Companies like the Emcor Group have benefitted from this bounce-back. The core focus of the Emcor Group is mechanical and electrical construction services rendered to US businesses. These activities are largely dependent on the health of the economy and the level of economic activity in the country. If you are bullish on these factors, then you may probably want to buy construction stocks 2021. Emcor Group could be one of the top candidates.
Emcor Group – A Play On Infrastructure
It is believed that the smaller companies have greater potential for significant growth than the largest companies on the index. The Emcor Group has a market capitalization of $6.4 billion. It is by no means a large company. Therefore, given that infrastructure spending is poised to go up in the US, companies like Emcor could be an interesting proposition. The recent infrastructure bill proposed by the Biden administration envisages spending more than a trillion dollars in upgrading America’s infrastructure. Construction and homebuilding activity is also relatively high. Low-interest rates and an economic rebound seem to be the driving factors for driving growth. Construction stocks for long term investing would be the ones that have a high potential for significant growth.
In the four years leading to the March 2020 crash, Emcor Group’s stock had risen by around 50%. The company had solid cash flows and reasonable growth numbers. Revenues had grown from $6.4 billion in 2014 to $9.1 billion in 2019. Gross margins had also improved from around 14% to nearly 16%. So, Emcor Group was a strong business even before the pandemic. The headwinds from the economic recovery and the infrastructure spending bode well for the longer-term prospects of the company.