Limbach (LMB) Reset and Data Center Pivot Explained | Yet Another Value Podcast

On this episode of Yet Another Value Podcast, host Andrew Walker brings back Yaron Naymark of One Main Capital to revisit Limbach (LMB), a name Naymark first pitched in June 2023. According to Walker, the stock went on “an absolute tear,” rising several-fold before falling about 75% from its peak, though still up meaningfully from the original pitch.

Naymark explains he is “double dipping” in Limbach because he believes the current setup is nearly as compelling as in 2023. The company missed its 2026 earnings targets and cut guidance, which has crushed the share price and sentiment. He argues that the market is treating recent weakness as structural, while he sees it as a temporary air pocket in demand.

The central argument from Naymark is that investors are getting a solid, mission-critical HVAC/MEP contractor at what he views as a steep discount to its intrinsic value. On top of that, he thinks Limbach is belatedly positioning itself to benefit from data center build-outs, a trend that has already re-rated many of its peers.

Naymark recaps Limbach’s evolution as a mechanical, electrical, and plumbing contractor focused mainly on HVAC for “mission critical” facilities such as hospitals and advanced manufacturing. The firm, over 100 years old, emerged from Enron’s bankruptcy under private-equity ownership and went public in 2016 via SPAC as a roll-up of small local contractors.

According to Naymark, the original strategy was to acquire fragmented regional players at roughly mid-single-digit EBITDA multiples and use the public vehicle as a consolidator. After project blow-ups on large general contractor (GC) jobs left it distressed heading into COVID, Limbach delevered, changed CEOs, and pivoted toward owner-direct (ODR) work like upgrades and retrofits directly for building owners.

He says that shift raised EBITDA margins from low single digits to low double digits as owner-direct grew from a small base to a sizable share of the mix. The current thesis, as he describes it, rests on three pillars:

• A more resilient, higher-margin ODR-heavy business still trading cheaply on today’s EBITDA.
• An ongoing consolidation opportunity through acquisitions, such as the Pioneer Power deal.
• A new push into data center projects, which he thinks could drive growth and multiple expansion.

In his view, investors no longer need to underwrite aggressive capital allocation to justify the stock; instead, he sees that as upside optionality.

Naymark describes 2026 as a “reset year” after Limbach hit what he calls an air pocket in demand on the owner-direct side. He attributes the slowdown to a mix of tariff and trade-war issues, healthcare-related reimbursement pressures tied to government legislation, geopolitical events like the Iran war, higher oil prices, and general macro caution causing more discretionary projects to be delayed.

He notes that in the first half, organic revenue fell in the low- to mid-single digits, while headline revenue actually rose due to the Pioneer Power acquisition. EBITDA, however, dropped roughly 30% year over year, which he mainly attributes to fixed-cost deleveraging and Pioneer’s lower margin profile. The company cut full-year EBITDA guidance from about 90 to 80, but the stock fell roughly 50%.

According to Naymark, the sharper share-price decline reflects investor skepticism that second-half guidance—implying a swing from down 30% EBITDA in the first half to up around 20% in the back half—is realistic. He acknowledges that Limbach appeared surprised, having sounded confident on the first-quarter call and then materially trimming guidance in the second quarter. Nonetheless, he contends management now has better visibility on burning through backlog, and he believes the full-year target is achievable or, if missed, will be missed only modestly.

Walker raises the main bearish narrative he has heard, including from a detailed short write-up: Limbach allegedly filled an orders gap by accepting low-margin work in 2025, and those jobs are now depressing profitability. Bears worry that this reveals either poor bidding discipline or a management team that does not fully understand its margin profile.

Naymark counters that if bookings had truly been taken at obviously poor economics, investors should have seen revenue growth with collapsing margins in the first half. Instead, he notes organic revenue declined while EBITDA fell disproportionately, which he thinks is better explained by fixed-cost deleverage, fewer favorable project write-ups compared with last year, and the dilutive effect of the Pioneer Power acquisition.

He concedes that he and other longs were too dismissive of weak bookings as the company transitioned toward more short-duration owner-direct work, and that the shorts “turned out to be right” on the near-term risk. Still, he does not view this as structural damage. On management, he highlights CEO Mike McCann’s long tenure, modest historic cash compensation, and large unmonetized equity stake as evidence of alignment and long-term commitment.

Naymark stresses that even if 2026 EBITDA ultimately lands closer to around the mid‑60s instead of the guided 80, his math still suggests the company would be generating enough pre-tax earnings and free cash flow to support more than the current market price, given what he describes as a very clean balance sheet.

A key theme is Limbach’s lack of participation in the initial data center construction boom, despite many HVAC/MEP peers seeing large data-center exposure and strong re-ratings. Walker flags that some comps have meaningfully outperformed Limbach’s share price over the past few years, and Naymark agrees Limbach “wrongfully” got grouped as a data center winner by the market last year even though it had effectively zero exposure.

Naymark argues that the missed wave hurt Limbach in two ways: it did not benefit from the high-margin, high-demand work, and it suffered inflation in labor and materials driven by data center demand without corresponding pricing power. He believes this mix of rising input costs and cautious, non–data-center customers compressed margins and weighed on owner-direct volumes.

The bullish twist, in his telling, is that Limbach is now actively pursuing data center projects and has fabrication capacity that many larger competitors lack. He notes that some peers have 30–60% of their revenue in data centers and that private and public MEP contractors are “capacity constrained,” which he thinks opens a path for Limbach to win share. If Limbach can layer sizable data center work on top of normalized healthcare and industrial demand, he believes EBITDA could climb materially, potentially into a range above the current year’s guidance, with operating leverage and a higher multiple reflecting the new exposure.

Looking beyond the immediate reset, Naymark is focused on several forward indicators. First, he wants to see evidence that bookings in core verticals like healthcare have normalized and are converting to revenue in line with management’s expectations for the back half. He highlights that Limbach’s business is usually second-half weighted, but this year is even more so, which makes execution in the next two quarters critical.

Second, he is watching whether Limbach can begin to book and disclose meaningful data center wins at acceptable margins. In his view, a combination of organic growth from core markets, incremental data center projects, and tuck-in acquisitions could push EBITDA well above the current run-rate over the next couple of years.

Third, he continues to monitor capital allocation, arguing that the consolidation runway remains intact and that any value created via M&A would come on top of what he regards as an already undervalued base business. In the broader portfolio context, he frames Limbach—alongside names like IWG (IWG) and KKR (KKR)—as a potential indirect AI beneficiary: a real-economy service provider that could benefit from AI-driven data center demand without being priced as a high-flying AI stock today.