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CECO Environmental Corp (NASDAQ:CECO) delivered impressive third-quarter results according to its October 28, 2025 earnings presentation, reporting significant year-over-year growth across all key metrics. Despite the strong performance, the company's stock tumbled nearly 18% in pre-market trading, suggesting investors may have concerns about valuation or future growth sustainability.
Executive Summary
CECO Environmental's Q3 2025 results demonstrated robust performance with substantial year-over-year improvements across all major financial indicators. The company reported record backlog levels, strong order intake, and significant revenue and earnings growth.
As shown in the following executive summary slide, CECO achieved 64% backlog growth, 44% order growth, 46% revenue growth, and 62% adjusted EBITDA growth compared to the same quarter last year:
The company reaffirmed its full-year 2025 outlook, projecting book-to-bill ratios exceeding 1.2x and revenue growth of approximately 35% year-over-year. Additionally, CECO introduced its 2026 outlook, targeting over $1 billion in orders and revenue between $850-950 million.
Quarterly Performance Highlights
CECO's third quarter results revealed strong momentum across key financial metrics. Revenue reached $198 million, representing a 46% increase from Q3 2024. Adjusted EBITDA grew 62% to $23.2 million with margins expanding 120 basis points to 11.8%. Adjusted earnings per share jumped 86% to $0.26, exceeding analysts' expectations of $0.25.
The detailed quarterly performance metrics are illustrated in this slide:
"Another great quarter... outlook remains very strong," the company noted in its presentation, highlighting the broad-based demand across its end markets. The strong performance was driven by growth in both organic business and acquisitions, with particular strength in power generation, semiconductor, water, and natural gas infrastructure segments.
Backlog and Order Trends
CECO's backlog reached a record $720 million, up 64% year-over-year, providing substantial visibility for future revenue growth. Orders for the quarter totaled $233 million, representing a 44% increase from the prior year and resulting in a book-to-bill ratio of 1.18x.
The following chart illustrates the consistent growth in backlog over multiple quarters, demonstrating the company's sustained momentum:
The company has maintained strong order intake for four consecutive quarters, with average quarterly orders of approximately $238 million. This consistent performance supports management's confidence in achieving its full-year targets and longer-term growth objectives.
Financial Health and Margins
CECO has maintained strong gross margin levels despite seasonal dynamics and mix effects. The company reported Q3 gross margins of approximately 33%, flat year-over-year, with continued productivity and project execution offsetting mix and seasonal absorption dynamics.
The following chart shows the company's gross margin progression over time:
While free cash flow has declined year-to-date compared to 2024 ($0.9 million versus $11.8 million), the company's leverage ratio improved from 2.6x at the end of 2024 to 2.3x as of September 30, 2025, indicating improved financial flexibility.
Market Positioning and 2026 Outlook
CECO highlighted its strong positioning across multiple end markets, particularly in energy transition, industrial water, and industrial air segments. The company's sales pipeline has grown to approximately $5.8 billion, up $300 million in the past quarter alone.
Looking ahead to 2026, CECO provided ambitious targets that represent substantial growth from its 2025 outlook:
The company expects orders to exceed $1 billion in 2026, with revenue projected to grow 15-25% year-over-year to $850-950 million. Adjusted EBITDA is forecast to increase 20-40% to $110-130 million, with margins expanding 100-150 basis points.
CECO's multi-year transformation shows impressive compound annual growth rates across key metrics:
Investor Reaction and Market Challenges
Despite the strong quarterly performance and optimistic outlook, CECO's stock dropped significantly in pre-market trading, falling 17.98% to $43.76. This decline suggests investors may have concerns about the sustainability of growth rates, potential margin pressures, or macroeconomic headwinds.
The company acknowledged certain uncertainties heading into 2026, including tariffs, inflation, and potential impacts from a U.S. government shutdown. These factors, combined with the stock's strong recent performance (up 154% over the past six months prior to the earnings release), may have contributed to the sell-off as investors reassess valuation levels.
CECO's presentation identified several market dynamics as "uncertain," which could be influencing investor sentiment despite the strong operational performance:
While CECO's operational results exceeded expectations, the market reaction highlights the challenges of maintaining investor confidence amid high growth expectations and macroeconomic uncertainties. The company's ability to execute on its ambitious 2026 targets while navigating these challenges will likely determine whether it can regain positive momentum in its stock price.
Full presentation:
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