Wedbush: Energy Recovery 'Hardly' A Cash Cow, It Will Underperform Market

In a report published Friday, Wedbush analyst David L. Rose maintained an Underperform rating on

, with a price target of $2. Energy Recovery reported losses again due to its cost structure and "ongoing investments into its money-losing growth markets," analyst David Rose said. Although the company continued to spend on its oil & gas initiatives, its O&G segment recorded no revenues, with its only customer having terminated its product lease in end- 2014. Energy Recovery reported a loss per share of $0.06 on revenues of $10.5 million, in-line with the Wedbush estimates but better than the consensus expectations of $(0.09) and $9.2 million, respectively. "As expected, the company benefited from mega project shipments, offset by higher operating expenses largely owing to non-recurring expenses related to CEO transition," Rose wrote. The company had generated losses for six straight quarters and in 16 of the last 18 quarters. In the report Wedbush noted that the losses were on account of "unpredictable and volatile nature of desal project timing, as well as cost control issues." Rose commented that although the company's management had indicated during its earnings call that its desal business was a "cash cow," it had "hardly demonstrated that the business can consistently generate cash." The EPS estimates for 2015 and 2016 have been raised from ($0.23) to ($0.22) and from $0.05 to $0.06, respectively.