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CECO Rises 16.1% YTD: Should You Buy the Stock Now or Wait?
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Key Takeaways
CECO shares are up 16.1% YTD, beating the industry and S&P 500 despite a recent monthly decline.
Engineered Systems revenues rose 35.2% in Q2 2026, while backlog reached $1.8 billion.
Thermon synergies support margins, but debt, acquisition costs and a 22.51X P/E remain concerns.
CECO Environmental Corp. (CECO - Free Report) shares have gained 16.1% in the year-to-date period, outpacing the industry’s 5.4% decline and the S&P 500’s growth of 11.5%. The company has outperformed its market peers like Tetra Tech Inc. (TTEK - Free Report) and Donaldson Company (DCI - Free Report) , which have returned 6.4% and declined 2.5%, respectively, over the same time frame.
CECO Outperforms Industry, Sector & S&P500
Image Source: Zacks Investment Research
Closing at $69.48 in the last trading session, the stock is trading below its 52-week high of $101.24 and higher than its 52-week low of $42.82.
Despite CECO’s decent performance in the year-to-date period, the stock has declined over the past month. The recent share price decline has left investors wondering how to approach the stock. Let’s take a closer look at CECO’s fundamentals, growth prospects and challenges to make an informed choice.
Factors Favoring CECO
The strongest driver of CECO’s business at the moment is strength in its Engineered Systems segment. In second-quarter 2026, revenues from the segment increased 35.2% year over year to $173.7 million, constituting 60.9% of the company’s revenues. The increase was driven by strength across the company’s power generation and natural gas infrastructure projects, along with its strong backlog execution.
Orders in the Engineered Systems segment jumped 200% year over year to $672.1 million, with organic orders rising 173.8%. The increase reflected strong demand for CECO’s energy and power technologies. Higher spending on energy infrastructure and growth across midstream and downstream markets have strengthened demand for the company’s emissions-control and acoustic solutions.
CECO’s backlog increased for 12 consecutive quarters and reached $1.8 billion at second-quarter 2026, with most expected to convert within one to two years. The backlog comprises a balanced mix of fixed-price contracts recognized on a cost-to-cost basis.
Long-cycle power generation and gas infrastructure projects represent a significant share of the backlog, while industrial process solutions provide additional diversification and help support cash generation. Ongoing growth in power generation, gas infrastructure and semiconductor activity improves CECO’s revenue visibility for the upcoming quarters.
In June 2026, CECO completed the Thermon Group buyout, which added a diversified earnings base. The inclusion of Thermon’s expertise in heat tracing, process heating and temperature management solutions strengthened CECO’s exposure across power generation, energy transition, infrastructure development and industrial reshoring markets and enhanced its role in mission-critical customer applications. In the first couple of months of closing, CECO captured about $13 million of annualized net adjusted EBITDA savings, roughly one-third of the $40 million target.
The company’s ongoing 80/20 sourcing and Business Transformation Office initiatives are positive for cost control. CECO has a clearer path to sustaining margin improvement with newer backlog carrying strong margins and the Thermon buyout adding a higher-margin profile.
CECO’s Earnings Estimate Revision
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CECO’s 2026 earnings has surged 30% to $2.43 per share over the past 60 days, indicating year-over-year growth of 173%. The consensus mark for 2027 earnings increased 30.5% to $3.34 per share, indicating a year-over-year increase of 37.2%.
Near-Term Concerns Prevail
Although CECO’s adjusted performance points to stronger underlying operations, its GAAP earnings were weighed down by acquisition-related expenses and purchase-accounting effects. In second-quarter 2026, the company posted a GAAP net loss of $34.8 million against GAAP net income of $9.5 million in the year-ago quarter. Its total cost of sales climbed 67.8% year over year during the quarter, while gross margin contracted 590 basis points to 30.3%. Results also reflected $45.5 million in acquisition and integration costs, along with a $9.5 million inventory fair-value adjustment associated with the Thermon buyout.
The company has also been facing the pressure of rising debt levels. Exiting the second quarter, its total outstanding borrowings were about $727.7 million. The same stood at $212.4 million at 2025-end. This increase was primarily attributable to funds raised to support the Thermon buyout. Exiting the second quarter, CECO’s net leverage was 2.7x trailing-12-month bank EBITDA, above its 2.0x-2.5x target range.
Stretched Valuation
Image Source: Zacks Investment Research
CECO’s lofty valuation remains another concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 22.51X, higher than the industry average of 19.72X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. Also, CECO stock is overvalued compared with its peers Tetra Tech and Donaldson. Currently, Tetra Tech and Donaldson are trading at 20.27X and 19.47X, respectively.
Final Take
Persistent strength in the power generation, gas infrastructure and semiconductors markets, along with robust backlog and synergies from the Thermon buyout, bodes well for CECO in the quarters ahead. However, rising operating expenses, high debt levels and premium valuation are limiting this Zacks Rank #3 (Hold) company’s near-term prospects.
While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point.
View the Zacks #1 Rank List
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CECO Rises 16.1% YTD: Should You Buy the Stock Now or Wait?
Key Takeaways
CECO Environmental Corp. (CECO - Free Report) shares have gained 16.1% in the year-to-date period, outpacing the industry’s 5.4% decline and the S&P 500’s growth of 11.5%. The company has outperformed its market peers like Tetra Tech Inc. (TTEK - Free Report) and Donaldson Company (DCI - Free Report) , which have returned 6.4% and declined 2.5%, respectively, over the same time frame.
CECO Outperforms Industry, Sector & S&P500
Image Source: Zacks Investment Research
Closing at $69.48 in the last trading session, the stock is trading below its 52-week high of $101.24 and higher than its 52-week low of $42.82.
Despite CECO’s decent performance in the year-to-date period, the stock has declined over the past month. The recent share price decline has left investors wondering how to approach the stock. Let’s take a closer look at CECO’s fundamentals, growth prospects and challenges to make an informed choice.
Factors Favoring CECO
The strongest driver of CECO’s business at the moment is strength in its Engineered Systems segment. In second-quarter 2026, revenues from the segment increased 35.2% year over year to $173.7 million, constituting 60.9% of the company’s revenues. The increase was driven by strength across the company’s power generation and natural gas infrastructure projects, along with its strong backlog execution.
Orders in the Engineered Systems segment jumped 200% year over year to $672.1 million, with organic orders rising 173.8%. The increase reflected strong demand for CECO’s energy and power technologies. Higher spending on energy infrastructure and growth across midstream and downstream markets have strengthened demand for the company’s emissions-control and acoustic solutions.
CECO’s backlog increased for 12 consecutive quarters and reached $1.8 billion at second-quarter 2026, with most expected to convert within one to two years. The backlog comprises a balanced mix of fixed-price contracts recognized on a cost-to-cost basis.
Long-cycle power generation and gas infrastructure projects represent a significant share of the backlog, while industrial process solutions provide additional diversification and help support cash generation. Ongoing growth in power generation, gas infrastructure and semiconductor activity improves CECO’s revenue visibility for the upcoming quarters.
In June 2026, CECO completed the Thermon Group buyout, which added a diversified earnings base. The inclusion of Thermon’s expertise in heat tracing, process heating and temperature management solutions strengthened CECO’s exposure across power generation, energy transition, infrastructure development and industrial reshoring markets and enhanced its role in mission-critical customer applications. In the first couple of months of closing, CECO captured about $13 million of annualized net adjusted EBITDA savings, roughly one-third of the $40 million target.
The company’s ongoing 80/20 sourcing and Business Transformation Office initiatives are positive for cost control. CECO has a clearer path to sustaining margin improvement with newer backlog carrying strong margins and the Thermon buyout adding a higher-margin profile.
CECO’s Earnings Estimate Revision
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CECO’s 2026 earnings has surged 30% to $2.43 per share over the past 60 days, indicating year-over-year growth of 173%. The consensus mark for 2027 earnings increased 30.5% to $3.34 per share, indicating a year-over-year increase of 37.2%.
Near-Term Concerns Prevail
Although CECO’s adjusted performance points to stronger underlying operations, its GAAP earnings were weighed down by acquisition-related expenses and purchase-accounting effects. In second-quarter 2026, the company posted a GAAP net loss of $34.8 million against GAAP net income of $9.5 million in the year-ago quarter. Its total cost of sales climbed 67.8% year over year during the quarter, while gross margin contracted 590 basis points to 30.3%. Results also reflected $45.5 million in acquisition and integration costs, along with a $9.5 million inventory fair-value adjustment associated with the Thermon buyout.
The company has also been facing the pressure of rising debt levels. Exiting the second quarter, its total outstanding borrowings were about $727.7 million. The same stood at $212.4 million at 2025-end. This increase was primarily attributable to funds raised to support the Thermon buyout. Exiting the second quarter, CECO’s net leverage was 2.7x trailing-12-month bank EBITDA, above its 2.0x-2.5x target range.
Stretched Valuation
Image Source: Zacks Investment Research
CECO’s lofty valuation remains another concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 22.51X, higher than the industry average of 19.72X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. Also, CECO stock is overvalued compared with its peers Tetra Tech and Donaldson. Currently, Tetra Tech and Donaldson are trading at 20.27X and 19.47X, respectively.
Final Take
Persistent strength in the power generation, gas infrastructure and semiconductors markets, along with robust backlog and synergies from the Thermon buyout, bodes well for CECO in the quarters ahead. However, rising operating expenses, high debt levels and premium valuation are limiting this Zacks Rank #3 (Hold) company’s near-term prospects.
While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.