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.
Inflation progressed towards the Fed's 2% goal recently, leading the Fed to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be debating whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.
Thankfully, environmental and facilities services stocks have been resilient with share prices up 7.1% on average since the latest earnings results.
Veralto (NYSE:VLTO)
Spun off from Danaher (NYSE:DHR) 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 delivered 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.
BrightView (NYSE:BV)
An official field consultant for Major League Baseball, BrightView (NYSE:BV) offers landscaping design, development, and maintenance.BrightView reported revenues of $738.8 million, down 3.6% year on year. This print met analysts’ expectations. Zooming out, it was a satisfactory quarter as it also logged an impressive beat of analysts’ earnings estimates but a miss of analysts’ Maintenance revenue estimates.
The stock is up 16% since reporting and currently trades at $16.71.
Montrose (NYSE:MEG)
Founded to protect a tree-lined two-lane road, Montrose (NYSE:MEG) provides air quality monitoring, environmental laboratory testing, compliance, and environmental consulting services.Montrose reported revenues of $173.3 million, up 8.9% year on year. This print was in line with analysts’ expectations. More broadly, it was a mixed quarter as it also produced an impressive beat of analysts’ operating margin estimates but a miss of analysts’ earnings estimates.
Montrose had the weakest full-year guidance update among its peers. The stock is down 9.6% since reporting and currently trades at $26.45.
This content was originally published on Stock Story
