CECO Gains From Strength in Engineered Systems: Can the Momentum Last?

CECO Environmental Corp. CECO is witnessing persistent strength in its Engineered Systems segment. In second-quarter 2026, revenues from the segment increased 35.2% year over year to $173.7 million, constituting 60.9% of the company’s revenues. In the first six months of 2026, the segment’s revenues increased 30.3% year over year. The surge in revenues was driven by strength across the company’s power generation and natural gas infrastructure projects, along with its strong backlog execution.

The Engineered Systems segment’s orders surged 200% to $672.1 million in second-quarter 2026, including organic growth of 173.8%. The orders were driven by solid demand for CECO’s energy and power technologies. The growth was mainly driven by CECO's energy and power technologies. Increased investment in energy infrastructure, along with expansion in midstream and downstream markets, has boosted demand for emissions-control and acoustic products.

CECO’s backlog comprises a balanced mix of fixed-price contracts recognized on a cost-to-cost basis. Long-cycle power generation and gas infrastructure projects account for a substantial portion, while industrial process solutions projects add diversification and support cash flow. Continued expansion in power generation, gas infrastructure and semiconductor activity also gives CECO stronger revenue visibility than many industrial peers with project-based business models.

Driven by business strength, CECO raised its 2026 revenue guidance to $1.300-$1.375 billion from $1.275-$1.375 billion. Adjusted EBITDA is projected to be in the $200-$225 million range, with free cash flow conversion of a minimum of 55% of adjusted EBITDA.

Segment Snapshot of CECO’s Peers

Tetra Tech Inc. TTEK continues to benefit from multi-year investment in water, environmental and defense programs across its major regions. In the third quarter of fiscal 2026 (ended June 2026), net revenues from Tetra Tech’s Government Services Group (excluding USAID/DOS and episodic disaster response) increased 7% year over year, supported by water infrastructure and defense-related projects.

Donaldson Company DCI is benefiting from recovery in the Industrial Solutions segment.
Revenues generated from the segment increased 7.7% year over year in the fourth quarter of fiscal 2026 (ended July 2026). Results benefited from strong contribution from Donaldson’s Facet acquisition.

CECO’s Price Performance, Valuation and Estimates

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Shares of CECO have surged 23.8% in the past six months compared with the industry’s growth of 5.1%.

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From a valuation standpoint, CECO is trading at a forward price-to-earnings ratio of 23.00X, above the industry’s average of 20.88X. CECO carries a Value Score of D.

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The Zacks Consensus Estimate for CECO’s 2026 earnings has surged 30% over the past 60 days.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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