Inside Evoqua Water Technologies’ Newly Added Risk Factors

Pennsylvania-based Evoqua Water Technologies (AQUA) provides water treatment solutions. It recently acquired STERIS’ (STE) renal business to expand its footprint and further its reach in the healthcare segment. Evoqua purchased the renal business for $196.3 million and expects it to contribute $180 million in annual revenue.

For Fiscal Q4 2021 ended September 30, Evoqua reported an 11% year-over-year increase in revenue to $426 million and beat the consensus estimate of $416.3 million. It posted EPS of $0.22, which declined from $0.26 in the same quarter in the previous year and missed the consensus estimate of $0.29. The company has set February 1 for the release of its upcoming earnings report.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Evoqua.

Risk Factors

According to the new TipRanks Risk Factors tool, Evoqua’s main risk category is Finance and Corporate, representing 28% of the total 36 risks identified for the stock. Legal and Regulatory and Production are the next two major risk categories at 22% and 19% of the total risks, respectively. Evoqua has recently updated its profile with four new risk factors.

Evoqua informs investors that it relies on third-party shipping companies to deliver supplies from vendors to its facilities and products to its customers. But it cautions that there are factors beyond its control that may impact its ability to complete projects on time and within budget. For example, it mentions that labor shortages and increases in fuel costs may result in delays that could harm its reputation and adversely affect its prospects. It also explains that while it has been able to pass on cost increases to customers, it may be unable to do so in the future, which could hurt its profitability.

The company cautions that if contaminants were found in water treated using its systems and people get sick or die as a result, it could lose customers and face product liability claims. It explains that actions taken by third parties using its products could result in contamination. Further, Evoqua says that many of its customers actively monitor its workplace safety record. It cautions that failure to follow certain safety policies could damage its reputation, lead to a loss of business, and result in increased regulatory scrutiny of its practices.

Evoqua tells investors that climate change may adversely affect its business in a variety of ways. For example, it mentions that extreme weather events may disrupt its operations, as well as those of its suppliers and customers, which could, in turn, reduce its sales. Additionally, as concerns over climate change grow, increased regulatory requirements could drive up the costs for the company.

The Finance and Corporate risk factor’s sector average is 48% compared to Evoqua’s 28%. Evoqua’s stock has gained about 37% over the past 12 months.

Analysts’ Take

Oppenheimer analyst Bryan Blair recently upgraded Evoqua stock to a Buy with a price target of $45, which implies 19.43% upside potential.

Consensus among analysts is a Moderate Buy based on 6 Buys and 3 Holds. The average Evoqua Water Technologies price target of $51 implies 35.35% upside potential to current levels.

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