In the first quarter, CECO Industries implemented strategic pricing adjustments to mitigate initial tariff impacts. To better handle a record backlog and a strong pipeline of projects, the company preemptively increased inventory purchases and recruited essential operational and customer-focused staff. This approach led to higher costs in engineering, project management, and business development, along with increased cash usage, which negatively affected Adjusted EBITDA for the quarter. However, these steps were crucial for positioning CECO favorably for project execution.
Starting in the second quarter of 2025, CECO plans to implement cost-cutting measures by eliminating redundant general and administrative roles and expenses arising from mergers and acquisitions. The company will also enhance its initiatives focused on productivity and efficiency. The anticipated outcome is an expansion in operating margins throughout the year, supported by sustained strong volume growth.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 5 analysts, the average target price for CECO Environmental Corp (CECO, Financial) is $35.80 with a high estimate of $40.00 and a low estimate of $33.00. The average target implies an upside of 86.46% from the current price of $19.20. More detailed estimate data can be found on the CECO Environmental Corp (CECO) Forecast page.
Based on the consensus recommendation from 6 brokerage firms, CECO Environmental Corp's (CECO, Financial) average brokerage recommendation is currently 2.2, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for CECO Environmental Corp (CECO, Financial) in one year is $23.71, suggesting a upside of 23.49% from the current price of $19.2. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the CECO Environmental Corp (CECO) Summary page.
CECO Key Business Developments
Release Date: February 25, 2025
- Full Year Revenue: $558 million, a record year with a 2% year-over-year growth.
- Adjusted EBITDA: $62.8 million, a 9% increase from the prior year, with margins expanding by approximately 70 basis points.
- Gross Margin: Expanded by 500 basis points over two years, with a gross profit dollar growth of approximately 53%.
- Q4 Orders: $219 million, a 71% increase year-over-year, with a book-to-bill ratio of 1.4.
- Full Year Orders: $667 million, up mid-teens year-over-year.
- Backlog: $541 million, a 46% increase from the previous year-end.
- Free Cash Flow: Outflow of $4 million in Q4 due to working capital timing, with delayed cash receipts of approximately $15 million.
- Net Debt: Approximately $180 million, with leverage at the end of the period reaching approximately 3 times bank EBITDA.
- 2025 Revenue Outlook: $700 million to $750 million, a 30% growth rate year-over-year at the midpoint.
- 2025 Adjusted EBITDA Outlook: $90 million to $100 million, a 50% increase versus 2024 at the midpoint.
- 2025 Free Cash Flow Guidance: 60% to 75% of full-year adjusted EBITDA.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CECO Environmental Corp (CECO, Financial) achieved a record full-year revenue of $558 million in 2024, despite only a 2% year-over-year growth.
- The company reported a record adjusted EBITDA of $62.8 million for 2024, marking a 9% increase from the previous year.
- CECO Environmental Corp (CECO) set new records for both quarterly and full-year orders, with Q4 orders reaching $219 million, a 71% increase year-over-year.
- The backlog at the end of 2024 was $541 million, a 46% increase from the previous year, providing strong visibility into 2025 revenue.
- The company is well-positioned to benefit from a multi-year capital investment super cycle in the power generation market and other industrial sectors.
Negative Points
- CECO Environmental Corp (CECO) experienced customer-driven project delays throughout 2024, impacting revenue recognition.
- Free cash flow was negatively impacted by approximately $30 million due to working capital timing and delayed customer payments.
- The company fell short of its revenue expectations for the fourth quarter of 2024, despite a sequential increase.
- Adjusted EBITDA margin for Q4 2024 was down 54 basis points year-over-year due to timing of investments and delayed revenue.
- There is uncertainty regarding potential impacts from tariffs and other legislative items, which could affect future financial performance.
