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Energy Recovery (ERII) to Post Q3 Earnings: What's in Store?
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Energy Recovery, Inc. (ERII - Free Report) is scheduled to release third-quarter 2021 results on Nov 04, after market close.
The company’s earnings beat expectations in each of the trailing four quarters, the surprise being 150.83%, on average. In the last reported quarter, earnings of 2 cents per share surpassed the Zacks Consensus Estimate of a loss of 1 cent by 300.00%.
Image Source: Zacks Investment Research
In the past three months, the company’s shares have gained 2.6% compared with the industry’s growth of 11.6%.
Key Factors
Energy Recovery is expected to have benefited from strong momentum in its water desalination business, driven by a recovery in demand for its products in the third quarter. The company’s business has been benefiting from strong sales in the megaproject and original equipment manufacturers channels, which are likely to get reflected in the quarter. Strength across its industrial wastewater business, backed by lucrative contracts from landfill, chemical, and lithium battery industries, is also likely to have supported its performance.
The company’s strong product portfolio, coupled with its investment in product innovation and marketing activities, is likely to have supported its performance in the third quarter. Its focus on improving operational productivity and a healthy liquidity position are also likely to have acted as tailwinds in the quarter.
However, over the past few quarters, rising cost of sales and operating expenses have been a concern for Energy Recovery. In second-quarter 2021, its cost of sales increased 10.8% year over year while selling, general and administrative expenses jumped 22.5%. Despite its focus on supply-chain optimization, supply-chain challenges and high labor and raw material costs might have adversely impacted its margin and profitability in the to-be-reported quarter.
International operations have also exposed the company to risks arising from unfavorable movements in foreign currencies and geopolitical issues, which might have hurt it.
The Zacks Consensus Estimate for the company’s third-quarter total revenues is currently pegged at $20.8 million, suggesting 22.3% and 1% growth from the year-ago and quarter-ago reported numbers, respectively. The consensus estimate for its earnings per share is pegged at a breakeven level, whereas it reported earnings per share of 10 cents and 2 cents in the year-ago quarter and the previous quarter, respectively.
According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat. But that is not the case here as we will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Energy Recovery has an Earnings ESP of 0.00%, as both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at a breakeven level.
Zacks Rank: The company carries a Zacks Rank #3.
Key Picks
Here are some companies you may want to consider from the Zacks Industrial Products sector as our model shows that these have the right combination of elements to deliver an earnings beat this season:
Image: Bigstock
Energy Recovery (ERII) to Post Q3 Earnings: What's in Store?
Energy Recovery, Inc. (ERII - Free Report) is scheduled to release third-quarter 2021 results on Nov 04, after market close.
The company’s earnings beat expectations in each of the trailing four quarters, the surprise being 150.83%, on average. In the last reported quarter, earnings of 2 cents per share surpassed the Zacks Consensus Estimate of a loss of 1 cent by 300.00%.
In the past three months, the company’s shares have gained 2.6% compared with the industry’s growth of 11.6%.
Key Factors
Energy Recovery is expected to have benefited from strong momentum in its water desalination business, driven by a recovery in demand for its products in the third quarter. The company’s business has been benefiting from strong sales in the megaproject and original equipment manufacturers channels, which are likely to get reflected in the quarter. Strength across its industrial wastewater business, backed by lucrative contracts from landfill, chemical, and lithium battery industries, is also likely to have supported its performance.
The company’s strong product portfolio, coupled with its investment in product innovation and marketing activities, is likely to have supported its performance in the third quarter. Its focus on improving operational productivity and a healthy liquidity position are also likely to have acted as tailwinds in the quarter.
However, over the past few quarters, rising cost of sales and operating expenses have been a concern for Energy Recovery. In second-quarter 2021, its cost of sales increased 10.8% year over year while selling, general and administrative expenses jumped 22.5%. Despite its focus on supply-chain optimization, supply-chain challenges and high labor and raw material costs might have adversely impacted its margin and profitability in the to-be-reported quarter.
International operations have also exposed the company to risks arising from unfavorable movements in foreign currencies and geopolitical issues, which might have hurt it.
The Zacks Consensus Estimate for the company’s third-quarter total revenues is currently pegged at $20.8 million, suggesting 22.3% and 1% growth from the year-ago and quarter-ago reported numbers, respectively. The consensus estimate for its earnings per share is pegged at a breakeven level, whereas it reported earnings per share of 10 cents and 2 cents in the year-ago quarter and the previous quarter, respectively.
Energy Recovery, Inc. Price and EPS Surprise
Energy Recovery, Inc. price-eps-surprise | Energy Recovery, Inc. Quote
Earnings Whispers
According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat. But that is not the case here as we will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Energy Recovery has an Earnings ESP of 0.00%, as both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at a breakeven level.
Zacks Rank: The company carries a Zacks Rank #3.
Key Picks
Here are some companies you may want to consider from the Zacks Industrial Products sector as our model shows that these have the right combination of elements to deliver an earnings beat this season:
Tetra Tech, Inc. (TTEK - Free Report) has an Earnings ESP of +0.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Deere & Company (DE - Free Report) has an Earnings ESP of +5.55% and a Zacks Rank #2.
Johnson Controls International plc (JCI - Free Report) has an Earnings ESP of +0.17% and a Zacks Rank of 2, at present.