Energy Recovery 2025 Q3 Earnings Beats Expectations with $0.12 EPS, Revenue Declines 17.1%

Energy Recovery (ERII) reported Q3 2025 earnings on Nov 5, 2025, with adjusted EPS of $0.12, surpassing the Zacks Consensus Estimate of $0.09. Revenue fell 17.1% to $32 million, below the $32.93 million estimate. The company maintained its four-year revenue guidance while reducing operating expense projections, reflecting cost control efforts.

Revenue

Energy Recovery’s Q3 revenue declined to $32 million, a 17.1% year-over-year drop from $38.58 million. The decrease was attributed to timing of contracted projects, with gross margin contracting 90 bps to 64.2% due to product mix and tariff costs. Despite lower revenue, the company exceeded Zacks’ $32.93 million estimate by 7.51%, signaling improved sales execution.

Earnings/Net Income

The company’s adjusted EPS of $0.12 beat estimates by $0.02, while net income fell to $3.87 million (-54.3% YoY). Operating income dropped 48.1% to $3.7 million, driven by lower revenue, though reduced operating expenses offset some declines. Despite beating estimates, the significant year-over-year declines in EPS and net income highlight ongoing challenges in maintaining profitability.

Post-Earnings Price Action Review

Energy Recovery’s stock surged 4.35% on the day of the report, with a 0.52% weekly gain and a 9.31% month-to-date rise. The positive momentum followed a 5.06% after-hours jump post-earnings, reflecting optimism around cost discipline and CO2/wastewater business growth. However, the Zacks Rank #3 (Hold) suggests market alignment in the near term, with no clear consensus on future upside.

CEO Commentary

CEO commentary aligned with results, emphasizing revenue timing and cost management. The company noted a 6.4% decline in operating expenses to $16.9 million and a cautious outlook for 2026, with strategic focus on optimizing project cadence and controlling indirect manufacturing costs.

Guidance

Energy Recovery reiterated Q3 results were in line with its 2025 revenue cadence but provided no explicit forward guidance. Risks include project timing, customer demand fluctuations, and third-party performance uncertainties, with no EPS or revenue targets outlined.

Additional News

Recent non-earnings updates include Zacks’ mixed estimate revisions and a #3 (Hold) rating, reflecting cautious investor sentiment. The company’s Pollution Control industry ranking (bottom 26% of Zacks sectors) underscores competitive challenges. Analysts highlight the importance of monitoring earnings estimate trends, with the current consensus projecting $0.70 EPS and $84.83 million revenue for the next quarter. No major M&A or executive changes were announced, but Donaldson (DCI), a peer in the industry, is expected to report results soon.

Post-Earnings Price Action Review (Continued)

The stock’s post-earnings rally, though modest, aligns with broader market optimism for energy-efficient technologies. However, the Zacks Rank’s neutral stance and lack of concrete guidance suggest limited near-term catalysts. Investors are advised to monitor cost-control progress and project timing, as these factors will determine whether the current momentum sustains.