Zacks Industry Outlook Donaldson, Environmental, Energy Recovery and Fuel Tech

For Immediate ReleaseChicago, IL – February 12, 2025 – Today, Zacks Equity Research Equity are Donaldson Company, Inc. DCI, CECO Environmental Corp. CECO, Energy Recovery, Inc. ERII and Fuel Tech, Inc. FTEK.Industry: Pollution ControlLink: https://www.zacks.com/commentary/2413492/4-pollution-control-stocks-to-watch-despite-industry-headwindsThe growing adoption of renewable energy sources, coupled with the rising demand for alternative fuels and the increasing popularity of electric vehicles, has impacted the outlook of the Zacks Pollution Control industry. Another concern for industry players is the shortage of skilled labor in the United States.However, strong demand for air pollution control products, arising from increasing greenhouse gas emissions and growing public awareness of the health related risks, has been allowing the industry participants to stay competitive in the marketC are likely to capitalize on these opportunities.About the IndustryThe Zacks Pollution Control industry comprises companies engaged in providing innovative filtration systems, replacement parts, solutions for managing medical wastes, energy recovery devices and other products. These products are primarily used in commercial, automotive repair, industrial, home healthcare, retail, construction, pharmaceutical and hospitality end markets. A few industry participants offer solutions to deal with industrial waste and commercial chemical products and technologies to tackle air pollution.One of the companies also delivers services related to infrastructure, water, resource management, energy, etc. to government and commercial clients. These companies are enhancing investments in developing innovative technologies, improving customer and employee experience and enhancing supply-chain modernization programs.Major Trends Shaping the Future of the Pollution Control IndustryStrong Demand for Air Pollution Control: Rapid urbanization and the consequent rise in greenhouse gas emissions from the industrial sector have been driving demand for air quality control systems. Growing public awareness of the health risks associated with air pollution is fueling market growth. Also, the expansion of infrastructure projects in developing countries is boosting the demand for pollution abatement equipment and technologies.Costs Related to Investments in Product Updates: Based on the guidelines of the pollution control boards in several countries, pollution-control equipment manufacturers frequently update their products and services. Such frequent investments often hurt the margins and profitability of the industry participants. The lingering effects of supply-chain constraints may continue weighing on the profitability of several industry participants. The shortage of skilled workers in the United States is another persistent concern for the industry.Emergence of Alternative Sources of Energy: The growing preference for renewable energy sources for power generation to reduce dependency on coal in the United States and other developed countries across the world is restraining the demand for industrial emission-abatement products and technologies. Several factors, including supportive government policies related to renewable energy, higher renewable investments, a reduction in overall costs of generating renewable electricity and the rapid adoption of electric vehicles (EV), have made the prospects of the industry players gloomy.Zacks Industry Rank Indicates Weak ProspectsThe Zacks Pollution Control industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #200. This rank places it in the bottom 20% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bleak prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the weak earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are keeping less faith in this group's earnings growth potential. The industry’s earnings estimates for 2025 have decreased 2.2% since the end of February 2024.Despite bleak near-term prospects, we will present a couple of stocks that you may want to retain in your portfolios. But it is worth taking a look at the industry’s shareholder returns and its current valuation first.Industry Outperforms Sector, Underperforms S&P 500Over the past year, the Zacks Pollution Control industry has underperformed the Zacks S&P 500 composite index and outperformed the broader Industrial Products sector.Over this period, the industry has grown 10% compared with the broader sector's and the S&P 500 Index’s increases of 7.7% and 22.6%, respectively.Industry's Current ValuationBased on the forward P/E (F12M), a commonly used multiple for valuing pollution control stocks, the industry is currently trading at 23.89X compared with the S&P 500’s 22.39X. It is also above the sector’s P/E (F12M) ratio of 19.40X.In the past five years, the industry has traded as high as 33.69X, as low as 20.35X and at the median of 26.46X.4 Pollution Control Stocks to Keep a Tab OnDonaldson: Headquartered in Bloomington, MN, Donaldson is engaged in the manufacturing and selling of filtration systems and replacement parts across the world. Solid momentum in the aftermarket business, driven by positive market trends and the impact of inventory reductions, is aiding the company’s Mobile Solutions segment. Strength in the commercial aerospace and rotorcraft markets is boosting the Industrial Solutions segment’s performance.Donaldson’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 7.1%. The Zacks Rank #3 (Hold) stock has gained 5% in a year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.CECO Environmental: Headquartered in Dallas, TX, this is an environmentally-focused industrial company that provides critical solutions in industrial air quality, industrial water treatment and energy transition solutions worldwide. Increased demand for separation and filtration services is supporting the company’s growth. The rising demand for industrial water technologies also bodes well. Its strategic acquisitions to expand capabilities in the industrial air and industrial water platforms should bolster growth. CECO currently carries a Zacks Rank of 3.CECO Environmental’s earnings surpassed the Zacks Consensus Estimate thrice in the preceding four quarters and missed once, the average beat being 0.2%. Shares of the company have gained 34% in the past year.Energy Recovery:Based in San Leandro, CA, the company is engaged in manufacturing and designing energy efficiency technology solutions utilized in the water desalination industry. Energy Recovery is poised to benefit from strength in its desalination and industrial wastewater businesses in the quarters ahead. New product introductions and a strong pipeline of projects also bode well for it.This Zacks Rank #3 company’s earnings surpassed the Zacks Consensus Estimate thrice in the preceding four quarters and missed once, the average beat being 156.2%. The Zacks Consensus Estimate for ERII’s 2025 earnings has been revised upward 4.1% in the past 60 days.Fuel Tech:Based in Warrenville, IL, FTEK develops technology for air pollution control and provides process optimization, water treatment and advanced engineering services. An increase in new projects and strong project executions are aiding its APC technology segment. The Zacks Rank #3 company’s business development activities, with an increased focus on global emission protocols across a variety of fuel sources, should also drive its growth.Fuel Tech’s earnings surpassed the Zacks Consensus Estimate in three of the preceding four quarters while missing the mark in one. The average beat was 45.8%. The consensus estimate for FTEK’s 2024 earnings has remained steady in the past 60 days.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CECO Environmental Corp. (CECO): Free Stock Analysis Report Donaldson Company, Inc. (DCI): Free Stock Analysis Report Fuel Tech, Inc. (FTEK): Free Stock Analysis Report Energy Recovery, Inc. 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