Montrose’s third quarter was marked by strong organic growth across all segments and a decisive expansion in margins, leading to a positive market response. Management attributed the results to robust demand from industrial clients, notable cross-selling following emergency response projects, and substantial progress in water treatment offerings. CEO Vijay Manthripragada emphasized the beneficial impact of advanced monitoring technologies and highlighted how recent regulatory changes at the state and international levels have created sustained demand for Montrose’s environmental services. He noted, “Our financial results speak to how environmental stewardship can work in concert with development and value creation.”
Is now the time to buy MEG? Find out in our full research report (it’s free for active Edge members).
Montrose (MEG) Q3 CY2025 Highlights:
- Revenue: $224.9 million vs analyst estimates of $202.8 million (25.9% year-on-year growth, 10.9% beat)
- Adjusted EPS: $0.36 vs analyst estimates of $0.32 (11.6% beat)
- Adjusted EBITDA: $33.66 million vs analyst estimates of $28.92 million (15% margin, 16.4% beat)
- The company slightly lifted its revenue guidance for the full year to $820 million at the midpoint from $815 million
- EBITDA guidance for the full year is $115 million at the midpoint, in line with analyst expectations
- Operating Margin: 4.4%, up from -0.6% in the same quarter last year
- Organic Revenue rose 24.6% year on year vs analyst estimates of 11.7% growth (1,292.1 basis point beat)
- Market Capitalization: $872.8 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Montrose’s Q3 Earnings Call
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Timothy Mulrooney (William Blair) asked about the sustainability of Assessment, Permitting & Response (AP&R) growth and the extent to which cross-selling is structural or one-time. CEO Vijay Manthripragada explained that while some revenue was pulled forward, cross-selling from emergency response projects is creating long-term opportunities beyond the current quarter.
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Timothy Mulrooney (William Blair) inquired about optimism in the water treatment business, specifically regarding PFAS regulations. Manthripragada clarified that the business is benefiting from broader applications, including pharmaceuticals and semiconductors, and that PFAS-related activity is only part of the growth story.
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James Ricchiuti (Needham & Company) sought details on the wind-down of renewables and its margin impact. Manthripragada explained that pulling back from renewables was due to policy uncertainty, and CFO Allan Dicks said margins would be higher once the wind-down is complete.
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Tim Moore (Clear Street) probed the potential for margin expansion in Remediation and Reuse. Manthripragada emphasized that water treatment’s higher margins will drive improvement as renewables exit the mix.
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Devin Leonard (Bank of America, for Andrew Obin) asked about recurring revenue from emergency response cross-selling. Manthripragada noted that the magnitude varies by event, but these efforts are generating multiyear downstream opportunities across services.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will focus on (1) the pace of margin improvement as the renewables business is fully wound down and water treatment expands, (2) progress in cross-selling and recurring work following large emergency response projects, and (3) the timing and scale of new acquisitions as Montrose prepares to restart its M&A program. Continued regulatory activity and state-driven demand shifts will also be important indicators to watch.
Montrose currently trades at $24.70, in line with $24.57 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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