As the Q1 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the environmental and facilities services industry, including Veralto (NYSE:VLTO) and its peers.
Many environmental and facility services are non-discretionary (sports stadiums need to be cleaned after events), recurring, and performed through longer-term contracts. This makes for more predictable and stickier revenue streams. Additionally, there has been an increasing focus on emissions and water conservation over the last decade, driving innovation in the sector and demand for new services. Despite these tailwinds, environmental and facility services companies are still at the whim of economic cycles. Interest rates, for example, can greatly impact commercial construction projects that drive incremental demand for these services.
The 15 environmental and facilities services stocks we track reported a mixed Q1. As a group, revenues were in line with analysts’ consensus estimates while next quarter’s revenue guidance was 2% below.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank’s 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they’re too little, too late for a macro that has already cooled.
Thankfully, environmental and facilities services stocks have been resilient with share prices up 7.9% on average since the latest earnings results.
Veralto (NYSE:VLTO)
Spun off from Danaher (NYSE:) in 2023, Veralto (NYSE:VLTO) provides water analytics and treatment solutions.
Veralto reported revenues of $1.25 billion, up 1.5% year on year. This print exceeded analysts’ expectations by 1.6%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ operating margin estimates and a decent beat of analysts’ earnings estimates.
Interestingly, the stock is up 12.5% since reporting and currently trades at $112.
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Best Q1: Tetra Tech (NASDAQ:TTEK)
Originally founded to focus on Alaska’s oil pipelines, Tetra Tech (NASDAQ:TTEK) provides consulting and engineering services to the water and infrastructure industries.
Tetra Tech reported revenues of $1.11 billion, up 12.4% year on year, outperforming analysts’ expectations by 2.8%. The business had a very strong quarter with an impressive beat of analysts’ backlog sales estimates and optimistic earnings guidance for the full year.
Tetra Tech pulled off the highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 16.2% since reporting. It currently trades at $49.76.
Weakest Q1: Perma-Fix (NASDAQ:PESI)
Tackling hazardous waste challenges since 1990, Perma-Fix (NASDAQ:PESI) provides environmental waste treatment services.
Perma-Fix reported revenues of $13.99 million, down 44.1% year on year, falling short of analysts’ expectations by 12%. It was a disappointing quarter as it posted a miss of analysts’ earnings estimates.
Perma-Fix delivered the weakest performance against analyst estimates and slowest revenue growth in the group. Interestingly, the stock is up 37.2% since the results and currently trades at $14.01.
Aris Water (NYSE:ARIS)
Primarily serving the oil and gas industry, Aris Water (NYSE:ARIS) is a provider of water handling and recycling solutions.
Aris Water reported revenues of $101.1 million, up 4.6% year on year. This print beat analysts’ expectations by 4.3%. More broadly, it was a satisfactory quarter as it also produced an impressive beat of analysts’ operating margin estimates but a miss of analysts’ earnings estimates.
Aris Water delivered the biggest analyst estimates beat among its peers. The stock is up 10.4% since reporting and currently trades at $16.46.
ABM Industries (NYSE:ABM)
Started with a $4.50 investment to purchase a bucket, sponge, and mop, ABM (NYSE:ABM) offers janitorial, parking, and facility services.
ABM Industries reported revenues of $2.09 billion, up 3.3% year on year. This number beat analysts’ expectations by 2.8%. Overall, it was a very strong quarter as it also logged a solid beat of analysts’ organic revenue estimates and a decent beat of analysts’ earnings estimates.
The stock is down 1.9% since reporting and currently trades at $55.01.
This content was originally published on Stock Story
