Chicago, IL – March 5, 2025 – Today, Zacks Equity Research Equity areDonaldson Company, Inc. DCI, Atmus Filtration Technologies Inc. ATMU, CECO Environmental Corp. CECO and Energy Recovery, Inc. ERII.
Industry: Pollution Control
Link: https://www.zacks.com/commentary/2425014/4-top-stocks-to-pick-from-a-promising-pollution-control-industry
The Zacks Pollution Control industry is poised for growth on the back of solid demand for air pollution control products due to rising greenhouse gas emissions and health-related risks associated with it. Stringent regulations and emission standards enacted by countries globally are expected to boost demand for industry participants.
However, the growing adoption of renewable sources of energy with a rising preference for alternative fuels has marred the outlook of the industry. Donaldson Company, Inc., Atmus Filtration Technologies Inc., CECO Environmental Corp. and Energy Recovery, Inc. are likely to capitalize on these opportunities.
The Zacks Pollution Control industry comprises companies engaged in providing innovative filtration systems, replacement parts, solutions for managing medical wastes, energy recovery devices and other products. These products are primarily used in the commercial, automotive repair, industrial, home healthcare, retail, construction, pharmaceutical and hospitality end markets.
A few industry participants offer solutions to deal with industrial waste and commercial chemical products and technologies to tackle air pollution. One of the companies also delivers services related to infrastructure, water, resource management, energy, etc., to government and commercial clients. These companies are enhancing investments in developing innovative technologies, improving customer and employee experience and enhancing supply-chain modernization programs.
Strong Demand for Air Pollution Control: Rapid urbanization and the consequent rise in greenhouse gas emissions from the industrial sector have been driving demand for air quality control systems. Growing public awareness of the health risks associated with air pollution is fueling market growth. Also, the expansion of infrastructure projects in developing countries is boosting the demand for pollution abatement equipment and technologies.
Stringent Government Regulations: Strict emission standards and related laws implemented by countries across the globe to tackle the depletion of the ozone layer and the ecosystem should continue boosting the demand for pollution-control equipment. Europe has some of the strictest pollution control laws in place.
Solid demand for medical, pharmaceutical and hazardous waste management services is boosting the prospects of some industry participants. Also, increased usage of Artificial Intelligence (AI) and the Internet of Things (IoT) in industrial processes has been enabling several industry players to monitor and identify the source of air pollution in real-time, thus driving the demand for pollution abatement technologies.
Addition of Oil Rigs: The ongoing geopolitical instability in the Middle East, Russia and Ukraine has made U.S. shale drillers consider adding rigs. The increase in oil production is likely to drive higher demand for pollution control equipment and services. Additionally, the growing need for engineering and assessment services in disaster response is creating a favorable market environment for few industry players.
Emergence of Alternative Sources of Energy: The growing preference of renewable energy sources for power generation to reduce dependency on coal in the United States and other developed countries across the world is restraining the demand for industrial emission-abatement products and technologies. Several factors, including supportive government policies related to renewable energy, higher renewable investments, a reduction in overall costs of generating renewable electricity and the rapid adoption of electric vehicles (EV), have made the prospects of the industry players gloomy.
The Zacks Pollution Control industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #89. This rank places it in the top 36% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than two to one.
Given the upbeat near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it is worth looking at the industry’s shareholder returns and its current valuation first.
Over the past year, the Zacks Pollution Control industry has underperformed the Zacks S&P 500 composite index and the broader Industrial Products sector.
Over this period, the industry has declined 3.8% against the broader sector’s and the S&P 500 Index’s increase of 3% and 19.8%, respectively.
Based on the forward P/E (F12M), a commonly used multiple for valuing pollution control stocks, the industry is currently trading at 17.69X compared with the S&P 500’s 21.53X. It is also below the sector’s P/E (F12M) ratio of 18.36X.
In the past five years, the industry has traded as high as 29.71X, as low as 17.69X and at the median of 23.02X.
Energy Recovery: Based in San Leandro, CA, the company is engaged in manufacturing and designing energy efficiency technology solutions utilized in the water desalination industry. Energy Recovery is poised to benefit from strength in its desalination and industrial wastewater businesses in the quarters ahead. New product introductions and a strong pipeline of projects also bode well for it.
This Zacks Rank #2 (Buy) company’s earnings surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 161.6%. The consensus estimate for ERII’s 2025 earnings has been revised upward 4.1% in the past 60 days. The stock has gained 2.8% in the year-to-date period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Donaldson: Headquartered in Bloomington, MN, Donaldson is engaged in the manufacturing and selling of filtration systems and replacement parts across the world. Solid momentum in the aftermarket business, driven by strong market demand in the original equipment manufacturer (OEM) channel, is aiding the company’s Mobile Solutions segment. Strength in the aerospace and defense markets is boosting the Industrial Solutions segment’s performance.
Donaldson’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters while missing the mark in one, the average surprise being 3.8%. The Zacks Rank #3 (Hold) stock has gained 2.5% in the year-to-date period.
Atmus Filtration: Headquartered in Nashville, TN, the company is a leading designer and producer of filtration and media solutions. Its leading position in the industrial filtration market, effective pricing actions and sound capital allocation strategy are expected to support its growth. Its global footprint, comprehensive offering of premium products and technology leadership should also bolster growth. ATMU currently carries a Zacks Rank of 3.
Atmus Filtration’s earnings surpassed the Zacks Consensus Estimate in each of the preceding four quarters. Th consensus estimate for ATMU’s 2025 earnings has been revised upward by a penny in the past 60 days. The stock has gained 45% in the past year. Shares of the company have rallied 64.9% in the past year.
CECO Environmental: Headquartered in Dallas, TX, this is an environmentally-focused industrial company that provides critical solutions in industrial air quality, industrial water treatment and energy transition solutions worldwide. Solid momentum in the dampers and expansion businesses is supporting its growth. The rising demand for industrial air, ducting and ventilation applications products also bodes well. Its strategic acquisitions to expand capabilities in the industrial air and industrial water platforms should bolster growth. CECO currently carries a Zacks Rank of 3.
CECO Environmental’s earnings surpassed the Zacks Consensus Estimate thrice in the preceding four quarters and missed once, the average surprise being 2.8%. Shares of the company have gained 29.2% in the past year.
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CECO Environmental Corp. (CECO) : Free Stock Analysis Report
Donaldson Company, Inc. (DCI) : Free Stock Analysis Report
Energy Recovery, Inc. (ERII) : Free Stock Analysis Report
Atmus Filtration Technologies Inc. (ATMU) : Free Stock Analysis Report
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