Energy Recovery Downgraded to Neutral Amid Project Risks
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4 days ago
0mins
Should l Buy ERII?
Source: seekingalpha
- Rating Downgrade Impact: Northcoast Research downgraded Energy Recovery (ERII) from Buy to Neutral, anticipating increased tactical risks from likely project delays in the Middle East, resulting in a 5.2% drop in stock price during Wednesday's trading.
- Pessimistic Financial Outlook: When ERII posted its Q4 earnings, it guided FY 2026 revenues below expectations due to project delays, particularly as the Iran war had not yet begun, prompting the analyst to lower 2026 and 2027 earnings estimates to reflect macroeconomic pressures.
- Middle East Economic Risks: The analyst highlighted that while water is a non-discretionary need, the timing of projects could be significantly affected by the Iran conflict, raising concerns about future demand growth amid expected substantial GDP declines in major desalinating nations.
- Stock Price Rebound Potential: Although ERII shares remain below pre-Q4 levels, they have rebounded from recent lows, and the analyst believes that the risk/reward appears balanced ahead of the company's Q1 earnings and guidance update.
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Analyst Views on ERII
Wall Street analysts forecast ERII stock price to rise
2 Analyst Rating
1 Buy
1 Hold
0 Sell
Moderate Buy
Current: 10.450
Low
16.00
Averages
19.50
High
23.00
Current: 10.450
Low
16.00
Averages
19.50
High
23.00
About ERII
Energy Recovery, Inc. is engaged in offering energy efficiency technology. It designs and manufactures solutions that provide cost savings through improved energy efficiency in commercial and industrial processes, with applications across several industries. Its segments include Water and Emerging Technologies. The Water segment develops, sales and supports PX, hydraulic turbochargers and pumps used in seawater desalination and wastewater treatment activities. The Emerging Technologies segment develops, sales and supports activities related to emerging technologies, such as the PX G1300 used in industrial and commercial refrigeration applications. Its solutions are marketed, sold in, or developed for, the fluid-flow and gas markets, such as seawater and wastewater desalination, natural gas, chemical processing and CO2-based refrigeration systems, under the trademarks ERI, PX, Pressure Exchanger, PX Pressure Exchanger (PX), Ultra PX, PX G, PX G1300, PX PowerTrain, AT, and Aquabold.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Energy Recovery Downgraded to Neutral Amid Project Risks
- Rating Downgrade Impact: Northcoast Research downgraded Energy Recovery (ERII) from Buy to Neutral, anticipating increased tactical risks from likely project delays in the Middle East, resulting in a 5.2% drop in stock price during Wednesday's trading.
- Pessimistic Financial Outlook: When ERII posted its Q4 earnings, it guided FY 2026 revenues below expectations due to project delays, particularly as the Iran war had not yet begun, prompting the analyst to lower 2026 and 2027 earnings estimates to reflect macroeconomic pressures.
- Middle East Economic Risks: The analyst highlighted that while water is a non-discretionary need, the timing of projects could be significantly affected by the Iran conflict, raising concerns about future demand growth amid expected substantial GDP declines in major desalinating nations.
- Stock Price Rebound Potential: Although ERII shares remain below pre-Q4 levels, they have rebounded from recent lows, and the analyst believes that the risk/reward appears balanced ahead of the company's Q1 earnings and guidance update.
See More
Energy Recovery, Inc. Shares Surge 7% Amid Optimism
- Stock Price Surge: Energy Recovery, Inc. (ERII) shares rose 7% to $10.12 in the last trading session, with trading volume significantly above average, reflecting market optimism about its future performance.
- Business Growth Drivers: The rally is primarily fueled by strong performance in its original equipment manufacturer business, particularly with increased shipments to the Americas, Asia, and Europe, indicating a recovery in market demand.
- Earnings Report Expectations: ERII is expected to report a quarterly loss of $0.09 per share, representing a year-over-year improvement of 30.8%, with revenues projected at $8.75 million, an 8.5% increase from the previous year, showcasing the company's resilience in challenging times.
- Earnings Estimate Revisions: The consensus EPS estimate for ERII has been revised 3.6% higher over the last 30 days, and such positive revisions are often correlated with stock price appreciation, suggesting investors should monitor its future performance closely.
See More
Marriott Vacations Reports Strong Q4, Shares Surge
- Earnings Beat: Marriott Vacations reported an adjusted EPS of $1.86 for Q4, surpassing market expectations of $1.57, which highlights the company's strong profitability and boosts investor confidence.
- Sales Growth: The company's quarterly sales reached $1.323 billion, exceeding the anticipated $1.294 billion, indicating sustained competitiveness in the market and enhancing shareholder value.
- Stock Surge: In pre-market trading, Marriott Vacations shares jumped 12.7% to $65.34, reflecting market optimism about the company's future growth potential and likely attracting more investor interest.
- Positive Guidance: The company also issued FY26 adjusted EPS guidance above estimates, further solidifying its leadership position in the vacation industry and laying a strong foundation for future growth.
See More
Energy Recovery, Inc. Q4 2025 Earnings Call Insights
- Strategic Focus on Water: CEO David Moon highlighted a strategic pivot towards the water business, identifying it as a rapidly growing and profitable market; despite setbacks in 2025 and 2026 due to delays in several large desalination projects, management remains confident in growth for 2027.
- Exit from CO2 Business: The company announced the winding down of its CO2 retail grocery business, which is expected to deliver annual savings of $7 million, with Moon describing this as the optimal path for shareholder value creation, resulting in a headcount reduction of about 20 employees.
- Revenue Guidance Adjustment: CFO Michael Mancini indicated that three major projects are expected to slip into 2026, impacting revenue by approximately $25 million to $30 million, with an additional buffer of $15 million to $25 million incorporated for potential further delays.
- Capital Expenditure Plans: Capital expenditure guidance for 2026 is set at $3 million to $6 million, with a similar range expected for 2027 to support new manufacturing facilities, as management maintains optimism for future growth despite the challenges posed by project delays.
See More
Global X Clean Water ETF Sees Unusual Trading Volume
- Volume Surge: The Global X Clean Water ETF experienced unusually high trading volume on Wednesday, with over 378,000 shares traded compared to a three-month average of about 45,000 shares, indicating a significant increase in market interest.
- Top Component Performance: Xylem led the ETF in trading volume with over 2 million shares changing hands, despite a decline of about 3.2% in its stock price, suggesting a potential decrease in investor confidence.
- Primo Brands Activity: Primo Brands also saw trading volume exceeding 1.3 million shares, with a stock price drop of about 1.3%, reflecting cautious market sentiment regarding its future performance, which may affect its short-term investment appeal.
- Energy Recovery vs. Badger Meter: Energy Recovery performed the best on Wednesday with a stock price increase of about 1.9%, while Badger Meter lagged significantly, down approximately 15.3%, highlighting a stark divergence among ETF components that could influence investor asset allocation strategies.
See More
Analysts Believe Energy Recovery's Narrative is Changing Despite Slower CO2 Adoption and Increased Goals
Fair Value Estimate Adjustment: Energy Recovery's fair value estimate has decreased from $18.60 to $18.24 due to tempered growth expectations, particularly regarding CO₂ refrigeration adoption, though analysts remain optimistic about the company's long-term prospects.
Analyst Ratings and Price Targets: Seaport Research raised its price target for Energy Recovery from $17 to $23, maintaining a Buy rating, while CJS Securities initiated coverage with an Outperform rating and a $19 target, indicating strong confidence in the company's growth potential despite some near-term risks.
Share Repurchase Program: Energy Recovery completed a $30M share repurchase program, retiring approximately 4% of its outstanding shares, which provides the company with flexibility in managing its capital return strategy amid changing market conditions.
Financial Metrics Overview: The company's revenue growth forecast has been revised down from 18.64% to 15.59%, while the net profit margin has improved from 27.22% to 29.44%, reflecting expectations for stronger long-term profitability despite a slight increase in the discount rate.
See More
Energy Recovery Downgraded to Neutral Amid Project Risks
- Rating Downgrade Impact: Northcoast Research downgraded Energy Recovery (ERII) from Buy to Neutral, anticipating increased tactical risks from likely project delays in the Middle East, resulting in a 5.2% drop in stock price during Wednesday's trading.
- Pessimistic Financial Outlook: When ERII posted its Q4 earnings, it guided FY 2026 revenues below expectations due to project delays, particularly as the Iran war had not yet begun, prompting the analyst to lower 2026 and 2027 earnings estimates to reflect macroeconomic pressures.
- Middle East Economic Risks: The analyst highlighted that while water is a non-discretionary need, the timing of projects could be significantly affected by the Iran conflict, raising concerns about future demand growth amid expected substantial GDP declines in major desalinating nations.
- Stock Price Rebound Potential: Although ERII shares remain below pre-Q4 levels, they have rebounded from recent lows, and the analyst believes that the risk/reward appears balanced ahead of the company's Q1 earnings and guidance update.
See More
Energy Recovery, Inc. Shares Surge 7% Amid Optimism
- Stock Price Surge: Energy Recovery, Inc. (ERII) shares rose 7% to $10.12 in the last trading session, with trading volume significantly above average, reflecting market optimism about its future performance.
- Business Growth Drivers: The rally is primarily fueled by strong performance in its original equipment manufacturer business, particularly with increased shipments to the Americas, Asia, and Europe, indicating a recovery in market demand.
- Earnings Report Expectations: ERII is expected to report a quarterly loss of $0.09 per share, representing a year-over-year improvement of 30.8%, with revenues projected at $8.75 million, an 8.5% increase from the previous year, showcasing the company's resilience in challenging times.
- Earnings Estimate Revisions: The consensus EPS estimate for ERII has been revised 3.6% higher over the last 30 days, and such positive revisions are often correlated with stock price appreciation, suggesting investors should monitor its future performance closely.
See More
Marriott Vacations Reports Strong Q4, Shares Surge
- Earnings Beat: Marriott Vacations reported an adjusted EPS of $1.86 for Q4, surpassing market expectations of $1.57, which highlights the company's strong profitability and boosts investor confidence.
- Sales Growth: The company's quarterly sales reached $1.323 billion, exceeding the anticipated $1.294 billion, indicating sustained competitiveness in the market and enhancing shareholder value.
- Stock Surge: In pre-market trading, Marriott Vacations shares jumped 12.7% to $65.34, reflecting market optimism about the company's future growth potential and likely attracting more investor interest.
- Positive Guidance: The company also issued FY26 adjusted EPS guidance above estimates, further solidifying its leadership position in the vacation industry and laying a strong foundation for future growth.
See More
Energy Recovery, Inc. Q4 2025 Earnings Call Insights
- Strategic Focus on Water: CEO David Moon highlighted a strategic pivot towards the water business, identifying it as a rapidly growing and profitable market; despite setbacks in 2025 and 2026 due to delays in several large desalination projects, management remains confident in growth for 2027.
- Exit from CO2 Business: The company announced the winding down of its CO2 retail grocery business, which is expected to deliver annual savings of $7 million, with Moon describing this as the optimal path for shareholder value creation, resulting in a headcount reduction of about 20 employees.
- Revenue Guidance Adjustment: CFO Michael Mancini indicated that three major projects are expected to slip into 2026, impacting revenue by approximately $25 million to $30 million, with an additional buffer of $15 million to $25 million incorporated for potential further delays.
- Capital Expenditure Plans: Capital expenditure guidance for 2026 is set at $3 million to $6 million, with a similar range expected for 2027 to support new manufacturing facilities, as management maintains optimism for future growth despite the challenges posed by project delays.
See More
Global X Clean Water ETF Sees Unusual Trading Volume
- Volume Surge: The Global X Clean Water ETF experienced unusually high trading volume on Wednesday, with over 378,000 shares traded compared to a three-month average of about 45,000 shares, indicating a significant increase in market interest.
- Top Component Performance: Xylem led the ETF in trading volume with over 2 million shares changing hands, despite a decline of about 3.2% in its stock price, suggesting a potential decrease in investor confidence.
- Primo Brands Activity: Primo Brands also saw trading volume exceeding 1.3 million shares, with a stock price drop of about 1.3%, reflecting cautious market sentiment regarding its future performance, which may affect its short-term investment appeal.
- Energy Recovery vs. Badger Meter: Energy Recovery performed the best on Wednesday with a stock price increase of about 1.9%, while Badger Meter lagged significantly, down approximately 15.3%, highlighting a stark divergence among ETF components that could influence investor asset allocation strategies.
See More
Analysts Believe Energy Recovery's Narrative is Changing Despite Slower CO2 Adoption and Increased Goals
Fair Value Estimate Adjustment: Energy Recovery's fair value estimate has decreased from $18.60 to $18.24 due to tempered growth expectations, particularly regarding CO₂ refrigeration adoption, though analysts remain optimistic about the company's long-term prospects.
Analyst Ratings and Price Targets: Seaport Research raised its price target for Energy Recovery from $17 to $23, maintaining a Buy rating, while CJS Securities initiated coverage with an Outperform rating and a $19 target, indicating strong confidence in the company's growth potential despite some near-term risks.
Share Repurchase Program: Energy Recovery completed a $30M share repurchase program, retiring approximately 4% of its outstanding shares, which provides the company with flexibility in managing its capital return strategy amid changing market conditions.
Financial Metrics Overview: The company's revenue growth forecast has been revised down from 18.64% to 15.59%, while the net profit margin has improved from 27.22% to 29.44%, reflecting expectations for stronger long-term profitability despite a slight increase in the discount rate.
See More
