Seaport downgrades Energy Recovery stock rating on Middle East risks

Seaport Global Securities has cut its rating on Energy Recovery (ERII) to Neutral from Buy, attributing the downgrade to ongoing conflicts in the Middle East affecting the company's operations. Energy Recovery's second-quarter 2026 financial results, announced on August 5, 2026, were impacted by these conflicts, which disrupted megaproject financing, procurement, and execution timelines. The company's stock, currently trading at $7.55, has fallen 44% year-to-date and is just 4% above its 52-week low of $7.25.

Energy Recovery's desalination guidance has been withdrawn, reflecting the company's heavy reliance on the Middle East market, which remains volatile. Revenue declined by 15% over the past year, and analysts predict further sales decline in the current year. While the wastewater business shows weak performance, it is considered to possibly be turning around, but the total addressable market remains unclear. Seaport Global Securities expects the downgrade until a new CEO is appointed and a clearer forward plan is presented.

Despite the headwinds, InvestingPro analysis suggests the stock may be undervalued at current levels based on its Fair Value assessment. Investors interested in further insights can explore 9 additional tips for ERII and comprehensive Pro Research Reports available for over 1,400 US equities.