Environmental solutions provider CECO Environmental (NASDAQ: CECO) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 34.8% year on year to $185.4 million. The company’s full-year revenue guidance of $750 million at the midpoint came in 2.5% above analysts’ estimates. Its non-GAAP profit of $0.24 per share was 35.8% above analysts’ consensus estimates.

Is now the time to buy CECO? Find out in our full research report (it’s free).

StockStory’s Take

CECO Environmental’s second quarter was marked by strong year-on-year growth and a significant positive reaction from the market. Management credited the results to a combination of record backlog, robust order momentum, and successful execution of its operating model. CEO Todd Gleason emphasized that the company’s recent investments in portfolio diversification and operational productivity have begun to yield tangible results. Notable drivers included large project wins in power generation and broad-based order strength across semiconductor, natural gas, and industrial water sectors. Integration of recent acquisitions also contributed positively to both top-line growth and improved gross margins.

Looking ahead, management’s updated full-year outlook is underpinned by a robust sales pipeline, sustained demand in core markets, and continued operational enhancements. CEO Todd Gleason outlined plans to add resources in anticipation of accelerating growth in 2026, with a focus on delivering double-digit revenue expansion. The company aims to balance growth investments with margin improvement by leveraging both organic initiatives and ongoing integration of recent acquisitions. Management acknowledged that inflation and supply chain costs remain factors, but expressed confidence in offsetting these pressures through pricing strategies and productivity gains.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to record bookings, strong backlog growth, and the successful integration of newly acquired businesses, which enabled CECO Environmental to capitalize on demand in power generation and emerging international markets.

• Record backlog growth: The company’s backlog reached $688 million, up over 75% year-over-year, driven by large orders in power generation and robust activity in semiconductor, industrial water, and natural gas infrastructure markets. Management emphasized that this level of backlog provides increased revenue visibility for the next 18 to 24 months.
• Largest order in company history: CECO secured its biggest-ever order for an emissions management solution in the U.S. power generation sector. Management noted this project as a milestone, with CEO Todd Gleason highlighting continued opportunities in similar large-scale projects as a result of strategic portfolio diversification.
• Acquisition integration delivers results: The Profire Energy acquisition, closed earlier in the year, generated the expected synergies, contributing significantly to both revenue and margin expansion. Other recent deals, including Verantis Environmental and W.K. Group, also provided access to new markets and geographies.
• Cost discipline supports margins: Operational productivity initiatives and targeted SG&A reductions began to materialize in the quarter, helping to offset inflationary and supply chain cost pressures. CFO Peter Johansson pointed to “the initial impact of our G&A cost actions” as a driver behind adjusted EBITDA improvement.
• International expansion accelerates: CECO’s international sales have grown from about $30 million to over $100 million in four years, with new offices and local teams supporting demand in regions such as the Middle East, India, and Southeast Asia. Management views these geographies as key to sustaining future growth and diversifying revenue streams.

Drivers of Future Performance

CECO Environmental’s management expects continued double-digit growth, fueled by a sizable pipeline in power generation, new international opportunities, and targeted investments that support both expansion and profitability.

• Power generation pipeline momentum: The company’s active pipeline in power generation exceeds $1 billion, with management anticipating significant order decisions over the next two years. This demand is tied to long-term themes such as electrification, data center buildout, and industrial reshoring, which are expected to drive sustained order flow.
• International and industrial diversification: CECO is increasing its presence in high-growth regions like the Middle East and Southeast Asia, with several large industrial water and metals processing projects in progress. Management believes these markets will support both near-term bookings and long-term revenue resilience beyond core North American operations.
• Margin and cost management focus: While management plans to add resources in anticipation of further growth, they remain committed to reaching low- to mid-teens adjusted EBITDA margins. Inflation and tariff-related cost pressures are expected to persist, but productivity initiatives and pricing strategies are intended to mitigate these risks and support profitability.

Catalysts in Upcoming Quarters

Looking ahead, our team will be monitoring (1) the pace and conversion of the company’s record backlog into revenue, (2) the scale and timing of large project wins in power generation and industrial markets, and (3) the effectiveness of margin improvement initiatives amid inflationary pressures. Progress in international market expansion and the integration of recent acquisitions will also be key signposts for CECO Environmental’s execution.

CECO Environmental currently trades at $47.20, up from $34.66 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

Stocks That Trumped Tariffs

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.