Boston, MA 03/06/2014 (wallstreetpr) – Energy Recovery, Inc. (NASDAQ:ERII) swung into profit in its fourth quarter and shares started going the predictable direction in the post-market session Wednesday. And Thursday has offered more room for the stock to rise further. The stock was up more than 36 percent a few minutes past noon.
Yet there is interesting story to the most recent earnings data, but more about that coming shortly. For now, let’s take a recap of the earnings report.
Energy Recovery, Inc. (NASDAQ:ERII) management had the pleasure to announce that they entered strong profit zone in the fourth quarter. That net income was in at $6.7 million, reflecting $0.13 per share. That compared with $2.2 million net income or $0.04 per share realized in the prior year over the same period.
Revenue in the quarter was up strongly 54 percent to $23.2 million, at a time when consensus estimate of analysts was $21.4 million.
More importantly, expenses were down significantly by 11 percent to $7.8 million.
Now the story
Energy Recovery, Inc. (NASDAQ:ERII) would not have attained strong earnings figures in the fourth quarter if it were not for great efforts to reduce expenses. While rise in revenue was commendable, the management was seemingly surprised by how they were able to attain lower expense levels. It thus goes down that in the most recent quarter, bringing operating expenses down by 11 percent was not a mean fete.
Besides expenses declining, another key metric that helped the results was strong profit margin which was actually helped by savings in raw materials, reduced scrap and manufacturing efficiency among other adjustments. So then, Energy Recovery, Inc. (NASDAQ:ERII) ended up keeping its gross profits margin at or above 60 percent.
The just reported quarter marked the third quarter in a row when margin levels have been maintained at or above of 60 percent. The gross profit margin in the fourth quarter of 2012 was 43 percent.
Investors Takeaway
Energy Recovery, Inc. (NASDAQ:ERII) is modeling a promising future when you look at the key performance indicators. With gross profit margin being maintained above 60 percent and expenses getting decimated, the company has room to keep posting earnings growth and the stock will no doubt benefit from the earnings power to stay up.
