Energy Recovery (NASDAQ: ERII) reports earnings after Wednesday’s close, with investors looking for signs that growth momentum is stabilizing after a volatile year. The water infrastructure specialist is expected to post a sharp year-over-year revenue acceleration, but its uneven track record relative to Wall Street expectations adds a layer of uncertainty. With shares up nearly 13% over the past month, expectations appear constructive heading into the print.

Revenue Growth in Focus After Mixed History

Last quarter, Energy Recovery reported $32 million in revenue, down 17.1% year over year, yet still managed to beat both revenue and earnings-per-share estimates. The earnings beat was viewed positively, though the revenue contraction highlighted project timing variability and cyclical exposure within desalination and industrial applications.

For the upcoming quarter, analysts expect revenue growth of 23.1% year over year — a notable improvement from the 17.3% growth posted in the comparable period last year. Importantly, analyst estimates have remained largely unchanged over the past 30 days, signaling a stable consensus view heading into results.

However, Energy Recovery has missed revenue expectations multiple times over the past two years, reinforcing that execution consistency remains a key concern. Investors will likely focus not just on headline revenue growth but also on order trends, backlog visibility, and margin sustainability.

Sector Signals Offer Cautious Optimism

Recent earnings from peers in the water infrastructure segment offer some context. Watts Water Technologies reported 15.7% year-over-year revenue growth, beating expectations and sending shares up nearly 7%. Mueller Water Products also topped estimates with 4.6% growth, lifting its stock modestly.

The broader segment has gained roughly 4.3% over the past month, reflecting improving sentiment around infrastructure spending and water resilience investments. Energy Recovery has outperformed, rising 12.7% over the same period. The stock currently trades around $16.08, below the average analyst price target of $19.05, implying potential upside if results meet or exceed expectations.

Valuation, Sentiment, and What Matters Most

With shares recovering into earnings, the bar may be higher than consensus revisions suggest. Markets will likely scrutinize margin trends, given Energy Recovery’s exposure to lumpy capital projects and longer sales cycles. Additionally, commentary around industrial applications and geographic demand could shape forward guidance.

From a positioning standpoint, the stock’s recent outperformance suggests investors are leaning optimistic, possibly anticipating a continuation of sector momentum. Still, companies with uneven earnings histories often see amplified volatility around results.

Looking ahead, the key question is whether Energy Recovery can translate cyclical demand recovery into sustained top-line acceleration while maintaining cost discipline. If management reinforces growth visibility and demonstrates improved execution consistency, shares could test analyst targets. Conversely, any shortfall relative to expectations may trigger profit-taking given the recent run-up.