CECO Environmental Corp.
) reported another positive surprise in its third quarter, as
earnings per share beat the Zacks Consensus Estimate by nearly 27%.
This air pollution control technology company has been
outperforming quarterly expectations for a while now, amassing an
average beat of more than 21% in the past 4 quarters.
This Zacks Rank #1 (Strong Buy) appears to have potential for even
more growth moving forward, given the major booking momentum from
North America and international customers, along with its focus on
cost-control measures and margin improvement.
Solid Third Quarter
On Nov 7, 2012, CECO Environmental Corp. reported third-quarter
2012 earnings per share of 19 cents, beating the Zacks Consensus
Estimate by 26.7% and last year's earnings by 35.7%.
Revenues grew 0.5% year over year to $33.1 million, driven by a
$1.1 million sales increase in the Engineered Equipment Technology
and Parts Group (EET&P), offset by a $1.0 million decrease in
the Components Parts Group (C/S).
Gross profit for the quarter increased $0.8 million or 8.2% to
$10.5 million, compared with $9.7 million in the prior-year period.
Gross margin for the quarter stood at 31.7% in 2012, compared with
29.5% in 2011. The increase in gross margin was primarily due to a
shift to higher margin work in both the EET&P Group and the C/S
Earnings Estimates on the Rise
The Zacks Consensus Estimate for 2012 increased 3.2% to 64 cents
over the last 60 days, reflecting year-over-year growth of 24.8%.
The Zacks Consensus Estimate for 2013 is up 1.4% to 75 cents over
the last 90 days, suggesting a year-over-year increase of 18.1%.
Valuation Looks Reasonable
Currently, CECO Environmental is trading at a premium to its peers
based on P/E, P/B and P/S. The premium valuation seems justified
given the company's solid earnings growth prospects. Its earnings
growth expectation of 13.8% over the next five years compares
favorably with the industry average of 6.80%, indicating room for
further expansion. Moreover, its return on equity (ROE) of 22.8% is
much higher than the peer group average of 1.6%.
The share price has increased at a higher pace than earnings over
the last few years. Currently, shares are hovering around
$10.00-$11.00. The consensus estimates for 2013 and 2014 are
trending upward. The share price should increase at a similar or
higher pace than the earnings estimate trend.
Based in Cincinnati, Ohio, CECO Environmental Corp. provides
air-pollution control technology products and services worldwide.
The company offers engineered equipment, cyclones, scrubbers,
dampers, diverters, regenerative thermal oxidizers, component parts
and monitoring and managing services. CECO Environmental Corp. has
a market cap of $158.4 million.
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