Zacks Investment Research downgraded Energy Recovery, Inc. ERII to a Zacks Rank #5 (Strong Sell) on Mar 24, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market.
Why the Downgrade?
Energy Recovery’s earnings track record have been disappointing, with negative earnings surprise in three out of trailing four quarters. Average earnings surprise is -97.50%. Also, investors’ sentiments for the stock have been weak since the release of fourth-quarter 2014 results on Mar 5.
The company reported loss of 9 cents per share, way below the Zacks Consensus Estimate of 15 cents of earnings per share. Moreover, the bottom line came in below the year-ago tally of 13 cents of earnings per share. Revenues decreased 36% year over year on lower volumes. Gross profit margin in the quarter declined 200 basis points to 61%, while operating margin was further weakened by a 78% increase in operating costs, resulting from hike in research and development as well as legal expenses.
Over the last 30 days, the Zacks Consensus Estimate for Energy Recovery has decreased from earnings of 1 cent per share to loss of 4 cents per share for 2015, while the same declined 38.5% to earnings of 8 cents per share for 2016. Also, the company has an Earnings ESP of -250.00% for 2015 and -137.50% for 2016.
Other Stocks to Consider
Energy Recovery currently has a market capitalization of $149 million. Better-ranked stocks in the industry include Landauer Inc. LDR, Perma-Fix Environmental Services Inc. PESI and Sharps Compliance Corp. SMED. While Landauer and Perma-Fix Environmental Services sport a Zacks Rank #1 (Strong Buy), Sharps Compliance carries a Zacks Rank #2 (Buy).
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