Avi Jaroslawicz

Avi Jaroslawicz of UBS Group asked about the sustainability of the construction segment's high margins, the company's prefabrication capacity and expansion plans, and how EMCOR balances booking new work against potential capacity constraints.

Answer

CFO Jason Nalbandian suggested a rolling 24-month average is a good indicator for sustainable construction margins, putting the range between 12.25% and 13.25%. CEO Tony Guzzi confirmed they are continuously expanding prefabrication capacity, primarily for internal projects. Guzzi also explained that the company manages its project mix strategically and builds supervision capabilities to meet demand, so they do not feel capacity constrained.

Avi Jaroslawicz from UBS Group AG inquired about the sustainability of the high margins in the construction segment, the company's prefabrication capacity and expansion plans, and how EMCOR balances taking on new work against its operational capacity.

Answer

CFO Jason Nalbandian suggested that a rolling 24-month average for construction margins, which is around 12.25% to 13.25%, is a good indicator of sustainability. Chairman, President & CEO Tony Guzzi confirmed they are continuously expanding prefabrication capabilities, with CapEx doubling to support this, primarily for their own projects. Guzzi explained they don't think in terms of being 'capacity constrained' but rather strategically manage their mix and build supervision capabilities to serve target markets over the long term.

Avi Jaroslawicz asked if the Q4 order book, which is 60-70% full, is uniform across regions. He also inquired about when customers might start pre-buying related to NOx rules, assuming no changes, and if this would be a first-half or second-half 2026 story.

Answer

Preston Feight, CEO, confirmed that the Q4 order book is pretty uniform across regions, with strong order intake in Europe matching North America's 67% full. He believes customers will consider all inputs (freight, rates, operating environment stability, 35 mg NOx) for their buying decisions. Mr. Feight expects significant interest in Q4 for 2026 buying plans, with reactions needed by Q1 if the 35 mg standard remains in place.

Avi Jaroslawicz asked if the Q4 order book, currently 60-70% full, was uniform across regions. He also inquired about when customers might start pre-buying due to the NOx rules, assuming no changes to the regulations.

Answer

CEO R. Preston Feight confirmed that the Q4 order book fill rate is pretty uniform across regions, including strong order intake in the European market. Regarding pre-buying, Feight noted that customers consider multiple factors, including freight fundamentals, rates, and operating environment stability. He anticipates significant customer interest in 2026 buying plans in Q4, with reactions to the 35 mg NOx standard likely needed by Q1 if it remains in place.

Avi Jaroslawicz from UBS Group inquired about the rationale behind the implied margin decline for the Utility segment in the second half of 2025. He also asked whether awards for data center fiber projects would be reported in fixed or MSA backlog.

Answer

EVP & CFO Ken Dodgen explained that Q2 Utility margins were exceptionally high due to some one-time items, and a sequential decline is expected in Q3 and Q4, with Q4 also subject to normal seasonality. He clarified that data center-related communications work would appear in both fixed project and MSA backlog, as the business is a mix of both contract types.

Avi Jaroslawicz from UBS Group inquired about the timing of tariff-related cost impacts, asking when they would fully flow through the P&L and whether the impact would be contained to 2025 or extend into 2026.

Answer

CFO Jim Nicholas explained that the bulk of the negative EBIT impact, estimated at nearly $120 million, will be felt in the second half of 2025. He noted that since tariffs were not a factor in the first half of 2025, they will create a year-over-year headwind in the first half of 2026. The company is actively working to mitigate these costs through pricing, supplier negotiations, and internal efficiencies.

Asked for an update on the CapEx plan for the rest of the year, including confidence in the current guidance, and for more detail on the intra-quarter utilization trend in Q2.

Answer

Management is confident in their $350M-$400M CapEx guidance and will not exceed it, viewing spending for new and existing stores as separate. They clarified that utilization has been fairly stable since the start of Q2, currently just above 67%, and they expect a normal seasonal lift in Q3, though the Q2 improvement from Q1 was slightly less than hoped.