) posted a decent 20% rise in adjusted earnings per share
(excluding special gains and charges) to $1.03 for the second
quarter of 2014 from 86 cents in the same quarter of 2013. With
this, earnings per share inched past the Zacks Consensus Estimate
by a penny.
The rise in adjusted earnings was attributable to strong sales
growth and operating margin gains. Adjusted net earnings rose 18%
to $314.4 million from $265.5 million in the second quarter of
Ecolab, Inc. - Earnings Surprise |
Revenues and Operating Earnings
Revenues grew 7% year over year to $3,568.2 million. Adjusted fixed
currency revenues increased 8% to $3,532.2 million. Revenues were
modestly higher than the Zacks Consensus Estimate of $3,558
million. Sales gain was driven by strong growth in Energy,
Specialty and Water businesses as well as in Latin America and Asia
Adjusted operating earnings rose 15% to $507.2 million while
adjusted operating margin went up 100 basis points (bps) to 14.2%
from 13.2% in the 2013-second quarter. In fixed currency, operating
earnings escalated 17% to $503.2 million in the quarter.
At constant exchange rate (CER), revenues from
segment grew 3% to $1,214 million, driven by solid gains in Latin
America and Asia Pacific and modest gains in both North America and
Europe, the Middle East and Africa (EMEA). Operating earnings in
fixed currency increased 8% to $162 million compared with the year
AT CER, revenues from the
segment increased 3% to $1,077 million, led by strong sales growth
in Specialty business and decent gains in Latin America, North
America, and Asia Pacific regions, which more than offset lower
sales in EMEA. In fixed currency, operating earnings increased 3%
to $200 million.
AT CER, the
segment revenues spiked 20% to $1,051 million in the second quarter
the year. Operating earnings at fixed currency surged 44% to $157
million. Acquisition (Champion Technologies) adjusted fixed
currency revenues grew 8% indicating decent growth in both the
upstream and downstream markets, while acquisition adjusted fixed
currency operating earnings jumped 40%, including synergies.
At CER, revenues from the
segment grew 7% to $191 million in the second quarter. Fixed
currency operating income rose 7% to $30 million.
ECL exited the quarter with cash and cash equivalents of $187.0
million, about half compared with $375.2 million as of Jun 30,
2013. Total debt decreased slightly by 5% to $7,128.8 million as of
Jun 30, 2014 from $7,508.2 million as of Jun 30, 2013. With this,
debt to capitalization ratio fell 400 bps to 49% from 53% as of Jun
During the quarter, ECL repurchased 0.8 million shares of its
For the third quarter of 2014, ECL expects adjusted gross margin of
47% and adjusted earnings per share of $1.18 to $1.22, which
reflects a 13-17% rise from adjusted earnings per share of $1.04 in
the comparable quarter of 2013. The Zacks Consensus Estimate of
$1.20 lies within the guided range.
For full year 2014, ECL anticipates adjusted gross margin of 47%
and upgraded its adjusted earnings per share to $4.14-$4.20 from
$4.10 to $4.20. The upgraded earnings per share reflects a 17 to
19% rise over the prior year. The Zacks Consensus Estimate of $4.18
for the year lies within the guided range.
We are impressed with ECL's second quarter results, which beat the
Zacks Consensus Estimate on both the earnings and revenue fronts.
We take note of the considerable earnings growth in the reported
quarter along with the growth-oriented outlook for the year.
However, we remain cautious about aggressive competition.
Challenging economic and market trends along with unfavorable
internal issues will likely be near-term headwinds for the company.
ECL currently carries a Zacks Rank #3 (Hold). Some better-ranked
stocks in the industry include Green Plains Inc. (
), KMG Chemicals Inc. (
), and Minerals Technologies Inc. (
) . All of them carry a Zacks Rank #1 (Strong Buy).
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