Energy Recovery (ERII) Price Target Raised to $14.00 by B. Riley Securities

B. Riley Securities has raised Energy Recovery's (ERII) price target to $14.00 from $12.50, a 12% increase, while maintaining a "Neutral" rating. This revision suggests a shift in the company's financial outlook. The average target price from 4 analysts is $15.63, with a high estimate of $19.00 and a low estimate of $12.50, implying a 4.87% upside from the current price.

Energy Recovery Inc. (ERII) reported its second-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.07, significantly higher than the forecasted loss of $0.01. This surprise, alongside a revenue beat, did little to move the stock, which showed a slight decline of 0.07% in after-hours trading, closing at $13.62. According to InvestingPro analysis, the company maintains a "GOOD" overall financial health score, though current trading levels suggest the stock may be overvalued. The company maintained its guidance for 2025, signaling confidence in its strategic direction. Key Takeaways EPS of $0.07 beat forecast by $0.08, reversing expected loss. Revenue reached $28.1 million, exceeding expectations by 10.5%. Stock remained stable despite earnings beat, reflecting market caution. Company announced $105 million in share repurchase authorizations. Maintained 2025 guidance, reinstated wastewater guidance. Energy Recovery demonstrated strong performance in Q2 2025, with significant gains in both EPS and revenue compared to forecasts. The company’s strategic initiatives in desalination and wastewater treatment continue to drive growth, supported by ongoing innovations in CO2 refrigeration technology. Despite the positive earnings surprise, the stock’s minimal movement suggests that investors may be awaiting further developments or guidance updates. Financial Highlights Revenue: $28.1 million, up from forecasted $25.43 million. Earnings per share: $0.07, beating the expected -$0.01. Share repurchase authorizations totaling $105 million announced. Earnings vs. Forecast Energy Recovery’s Q2 2025 earnings per share of $0.07 surpassed the forecasted -$0.01, marking an 800% surprise. Revenue also exceeded expectations, coming in at $28.1 million against a forecast of $25.43 million, a 10.5% surprise. This positive deviation from forecasts highlights the company’s strong operational execution and market positioning. Market Reaction Following the earnings announcement, Energy Recovery’s stock showed a minor decrease of 0.07%, closing at $13.62 in after-hours trading. This stability, despite the earnings beat, suggests that investors are cautiously optimistic, potentially looking for further clarity on future guidance and market conditions. Analyst targets range from $12.50 to $19.00, with consensus suggesting potential upside. The stock’s current price remains within its 52-week range of $10.86 to $20.27, trading at a P/E ratio of 36.09x. Outlook & Guidance The company maintained its 2025 guidance across all metrics and reinstated its wastewater guidance, reflecting confidence in its strategic initiatives. InvestingPro analysis indicates the company has been profitable over the last twelve months with impressive gross margins, supporting its growth trajectory. Energy Recovery is targeting long-term goals for 2029, with a focus on expanding its presence in the water scarcity and reuse markets. The company plans to provide 2026 guidance in its Q3 earnings call. Get access to the full ERII Pro Research Report and discover what Wall Street professionals know about this stock through intuitive visuals and expert analysis, available exclusively on InvestingPro. Executive Commentary CEO David Moon expressed increasing conviction in the long-term trends driving the business, while CFO Mike Mancini highlighted the positive impact of water scarcity trends on long-term growth. Mancini also noted that regulatory drivers, influenced by water scarcity issues, are critical to the company’s market opportunities. Risks and Challenges Regulatory changes could impact market conditions. Economic pressures may affect customer investment in new projects. Supply chain disruptions could hinder product development and delivery. Market saturation in key segments may limit growth potential. Competition in CO2 refrigeration technology could impact market share. Q&A During the earnings call, analysts inquired about the impact of tariff reductions in China, which have enabled project execution, and the company’s ongoing summer testing of CO2 refrigeration technology. Questions also focused on the wastewater strategy, with the company emphasizing its focus on five key verticals and building reference cases for future growth. Full transcript - Energy Recovery Inc (ERII) Q2 2025: Operator/Moderator: Good day, ladies and gentlemen, and welcome to Energy Recovery’s Second Quarter twenty twenty five Earnings Call. During today’s call, Energy Recovery may make projections and other forward looking statements under the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995 regarding future events or the future financial performance of the company. These statements may discuss our business, economic and market outlook, growth expectations, new products and their performance, cost structure and business strategy. Forward looking statements are based on information currently available to the company and on management’s beliefs, assumptions, estimates and projections. Forward looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. We refer you to documents the company files from time to time with the SEC, specifically the company’s annual Form 10 ks and quarterly Form 10 Q. These documents identify important factors that could cause actual results to differ materially from those contained in our projections or forward looking statements. All statements made during this call are made only as of today, 08/06/2025, and the company expressly disclaims any intent or obligation to update any forward looking statements made during this call to reflect subsequent events or circumstances unless otherwise required by law. Our hosts for today’s call are David Moon, President and Chief Executive Officer of Energy Recovery and Mike Mancini, Chief Financial Officer. I would now like to turn the call over to Mr. Moon. David Moon, President and Chief Executive Officer, Energy Recovery: Thank you, operator, and good afternoon, everyone. Earlier today, we released a letter to shareholders on the Investor Relations section of our website that reviews business and financial performance during the quarter. Prior to opening the line for questions and answers, I’d like to highlight a few important takeaways from that letter. First, we are reiterating our 2025 guidance on all metrics and reinstating our wastewater guidance. Our core desalination business is proving resilient to the macro environment. We signed multiple large deals in the period and we have line of sight to full year revenue based on our contracts and pipeline. In wastewater, the tariff impacts are expected to be better than we initially indicated in Q1 and we are comfortable issuing guidance despite remaining tariff uncertainty. Second, today we announced an additional share repurchase program. In the past ten months, we’ve announced three share repurchase authorizations totaling $105,000,000 We believe these programs will enable us to repurchase over 10% of our outstanding shares in aggregate, while still executing our playbook and reinvesting for growth. And lastly, our conviction in the long term trends driving our business is increasing. Contracted desalination capacity, water reuse capacity, and CO2 refrigeration installations are all growing at high rates. We are poised to capture the upside of these trends as we march towards our 2029 goals. I’d also like to say thank you to our employees here at Energy Recovery. The team was creative and decisive this quarter in executing during an environment of high volatility. With that, we will now move to the question and answer portion of our conference call. Operator, please open the line for questions. Operator/Moderator: Your first question comes from Ryan Pfingst with B. Riley. Your line is open. Ryan Pfingst, Analyst, B. Riley: Guys. Thanks for taking my question and congrats on hey, David, and congrats on the strong update here. Appreciate the color around annual desalination contracted capacity in the shareholder letter just now, David. Does that kind of expected capacity growth in addition to your recent awards give you confidence perhaps in achieving the higher end of the longer term ranges you set in November for decel revenue, particularly if we’re thinking about 2026? David Moon, President and Chief Executive Officer, Energy Recovery: Yes. I think so. That’s a good question. I think it’s too early to tell. And just a reminder, that contracted capacity, those are projects that are we believe will be tendered during that time period, but making water could be two or three years out in terms of when the projects are ready. So we’re still getting clarity around the content of that $550,000,000 pipeline. But I think with the awards that we saw this quarter and what we’re seeing early in 2026, we’re feeling confident about 2026. And we’ll be able to give you some guidance around 2026 as we get into the third quarter earnings call. Mike Mancini, Chief Financial Officer, Energy Recovery: Yes. And Ryan, just to add there, I think it’s more indicative of the increasing pace of desalination that the water scarcity trends are driving action and that is really good for our long term growth. It’s hard to pinpoint that and make that any specific annual growth, but it is just a coming wave. David Moon, President and Chief Executive Officer, Energy Recovery: I think and I think that’s a coming wave for desal and I also think it bodes well for wastewater as well. Ryan Pfingst, Analyst,