CECO Environmental Corp (TXSE:CECO) shares are surging on Monday after the company reported third-quarter results.
Adjusted EPS of 60 cents missed the 83 cent estimate. Revenue rose 105% year over year to $404.428 million, including a full quarter of Thermon results, beating the $208.104 million estimate.
Adjusted EBITDA surged 201% to $70.1 million, with margins expanding 550 basis points to 17.3%.
Thermon Integration and Cash Flow
Thermon integration generated $22 million in annualized net adjusted EBITDA savings in six months, achieving 55% of the three-year target.
CECO also realized $2.5 million in revenue synergies, with commercial opportunities potentially adding one to two percentage points to Thermon’s organic growth.
Adjusted free cash flow reached $154 million during the quarter. Management expects further debt reduction from fourth-quarter collections. ERP implementation across legacy CECO entities is expected to be substantially complete by mid-2027.
Orders and Backlog
Orders increased 234% to $778 million, resulting in a book-to-bill ratio of approximately 1.92x.
Backlog de-booking rates remained below 0.5%, while the sales pipeline exceeded $9 billion and is expected to surpass $10 billion. Data centers account for 20% of backlog, while multi-industrial and energy applications represent 80%.
Management expects at least 70% of year-end 2026 backlog to convert into 2027 revenue.
Legacy CECO Performance
Legacy CECO posted 30% organic revenue growth and 64% adjusted EBITDA growth. Orders grew approximately 165%.
Backlog reached a record $2.193 billion, up 205% year over year and 21% sequentially. This marked 13 consecutive quarters of growth and approximately 10.2 times expansion since the end of 2021.
2026 and Long-Term Outlook
The company guided for 2026 sales of $1.300 billion-$1.375 billion, above the $1.103 billion analyst estimate, and adjusted EBITDA of $200 million-$225 million.
CECO also raised its 2026 orders outlook to at least $2.5 billion and expects year-end backlog to exceed $2.2 billion.
2027, 2028 Guidance
For 2027, CECO introduced revenue guidance of $2.1 billion-$2.3 billion and adjusted EBITDA of $475 million-$525 million.
Midpoint estimates are approximately $2.2 billion in revenue and $500 million in adjusted EBITDA, implying a 22.7% margin.
Revenue growth is expected to exceed 60% against reported 2026 guidance and reach approximately 40% against the pro forma outlook. Adjusted EBITDA growth is projected above 130% and approximately 90%, respectively.
Orders are expected to grow at least 20%, while free cash flow conversion is projected at 50%-60% of adjusted EBITDA.
Higher backlog margins, integration savings, volume growth and productivity improvements are expected to support profitability.
For 2028, management expects double-digit revenue and adjusted EBITDA growth, with adjusted EBITDA margin reaching approximately 23.
CECO Stock Price Activity: CECO Environmental shares were up 22.74% at $53.65 at the time of publication on Monday.
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