For those interested in investments that have an ethical or sustainable edge, CECO Environmental Corp. (NASDAQ: CECE), ticks all the boxes. As a world leader in clean air solutions, CECO works in industries of all sizes and across all sectors to clean up the world’s skies. And with future earnings projected to move along nicely, CECO could also be a worthy investment in its own right.
CECO Environmental (market cap $205 million) has been one of the world’s leading air solution providers for more than 30 years, and was the first company in the U.S. to design a system to meet the global permissible exposure limit to lead (50 microgram/cubic meter) in air. Since then, CECO and its 12 subsidiary companies, have been successful in pioneering many more ‘firsts’ and have managed to grow the company from a market price of just over $2 to $12, over the last four years.
CECO Environmental has a history of beating earnings estimates, with last quarter’s figures showing EPS numbers that were 27 percent higher than the year before and net income up 14.8 percent. Earnings are on an upward trend for at least the next couple of quarters and the company also boasts cash reserves of $23 million (from $12.7 million in 2011) with zero debt. Furthermore, the company recently announced new orders totaling $11.4 million. Outlook for the company is therefore pretty good with CEO, Jeff Lang posting these upbeat comments last quarter: “During 2012, we continued our focus on profitable revenues … together with our recent exciting acquisitions of both Aarding and Adwest, CECO is ideally positioned within our industry to become the global leader in the air pollution control sector.” Indeed, the acquisitions of Aarding and Adwest have come at a good time for CECO and give extra impetus for the upcoming first quarter results.
The $11.4 million of new orders that were announced in January come from the refinery, automotive, utility, and large industry sectors from all over the world including; China, France, the United States, Canada, Mexico and the Middle East, as well as a natural gas utility in Argentina. But, it is China that has the potential to make the biggest impact on future revenues for CECO as it moves to clean its skies from decades of intense, industrial growth. In fact, the more China develops, the more it is criticized on a global (and local) scale for its slipping pollution standards. In Tiananmen Square recently, levels of PM2.5, a measure of pollutants in the air, surged to 993. The World Health Organization recommends exposure of no more than 25 and Greenpeace has estimated that exposure to PM2.5 contributed to 8,572 premature deaths in four major cities in 2012. It is therefore no wonder state media and outside officials are now calling for a big push to combat the rising pollution levels.
With 20 percent of operating income already coming from China, CECO Environmental already has a decent grip on the area and is likely in a much better position than its competitors to take advantage of the situation.