As the Q2 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the industrial & environmental services industry, including CECO Environmental (NASDAQ: CECO) and its peers.
Growing regulatory pressure on environmental compliance and increasing corporate ESG commitments should buoy the sector for years to come. On the other hand, environmental regulations continue to evolve, and this may require costly upgrades, volatility in commodity waste and recycling markets, and labor shortages in industrial services. As for digitization, a theme that is impacting nearly every industry, the increasing use of data, analytics, and automation will give rise to improved efficiency of operations. Conversely, though, the benefits of digitization also come with challenges of integrating new technologies into legacy systems.
The 7 industrial & environmental services stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 0.8% while next quarter’s revenue guidance was 1.3% below.
In light of this news, share prices of the companies have held steady as they are up 1.2% on average since the latest earnings results.
Best Q2: CECO Environmental (NASDAQ: CECO)
With roots dating back to 1869 and a focus on creating cleaner industrial operations, CECO Environmental (NASDAQ: CECO) provides technology and expertise that helps industrial companies reduce emissions, treat water, and improve energy efficiency across various sectors.
CECO Environmental reported revenues of $185.4 million, up 34.8% year on year. This print exceeded analysts’ expectations by 3.5%. Overall, it was an exceptional quarter for the company with a solid beat of analysts’ EPS estimates and full-year revenue guidance topping analysts’ expectations.
Todd Gleason, CECO's Chief Executive Officer commented, “We delivered another record quarter, led by tremendous orders, which were up 95 percent year-over-year. Our multi-quarter string of record bookings enabled our highest ever quarterly revenue and increased our backlog to an all-time high of $688 million, which is up 76 percent versus last year. Our diverse and well-positioned portfolio of leading environmental solutions for industrial air, industrial water and energy transition markets continue to gain traction in key markets and new geographies. In the quarter, we booked CECO's largest-ever order which will provide emissions management solutions for a large power generation project. That order, combined with continued strong natural gas and water infrastructure and other energy transition projects, helped push second quarter orders to the all-time record. We are excited about our ability to capitalize on these mega-theme opportunities as well as our steady return on investment associated with our ongoing portfolio transformation.”
CECO Environmental pulled off the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 29.5% since reporting and currently trades at $44.90.
Vestis (NYSE: VSTS)
Operating a network of more than 350 facilities with 3,300 delivery routes serving customers weekly, Vestis (NYSE: VSTS) provides uniform rentals, workplace supplies, and facility services to over 300,000 business locations across the United States and Canada.
Vestis reported revenues of $673.8 million, down 3.5% year on year, in line with analysts’ expectations. The business had a very strong quarter with an impressive beat of analysts’ EPS estimates.
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 13.2% since reporting. It currently trades at $5.19.
Is now the time to buy Vestis? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: Pitney Bowes (NYSE: PBI)
With a century-long history dating back to 1920 and processing over 15 billion pieces of mail annually, Pitney Bowes (NYSE: PBI) provides shipping, mailing technology, logistics, and financial services to businesses of all sizes.
Pitney Bowes reported revenues of $461.9 million, down 5.7% year on year, falling short of analysts’ expectations by 2.9%. It was a softer quarter as it posted full-year revenue guidance missing analysts’ expectations and a miss of analysts’ EPS estimates.
Pitney Bowes delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 1.7% since the results and currently trades at $11.19.
Read our full analysis of Pitney Bowes’s results here.
UniFirst (NYSE: UNF)
With a fleet of trucks making weekly deliveries to over 300,000 customer locations, UniFirst (NYSE: UNF) provides, rents, cleans, and maintains workplace uniforms and protective clothing for businesses across various industries.
UniFirst reported revenues of $610.8 million, up 1.2% year on year. This number came in 0.6% below analysts' expectations. More broadly, it was a satisfactory quarter as it also produced a solid beat of analysts’ EPS estimates but full-year revenue guidance meeting analysts’ expectations.
The stock is down 9.3% since reporting and currently trades at $172.61.
Read our full, actionable report on UniFirst here, it’s free.
Driven Brands (NASDAQ: DRVN)
With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ: DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America.
Driven Brands reported revenues of $551 million, up 6.2% year on year. This result beat analysts’ expectations by 1.9%. Taking a step back, it was a mixed quarter as it also recorded a solid beat of analysts’ EPS estimates but a miss of analysts’ full-year EPS guidance estimates.
The stock is down 2.2% since reporting and currently trades at $16.62.
Read our full, actionable report on Driven Brands here, it’s free.
Market Update
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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