Ecolab Inc. (ECL): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Ecolab's 2014-second quarter adjusted EPS of $1.03 grew 20% from last year and inched past the Zacks Consensus Estimate by $0.01. Year-over-year growth was led by solid top-line growth and operating margin gains. Revenues grew 7% to $3,568.2 million and topped the mark. Strong growth in Energy, Specialty and Water businesses as well as in Latin America and Asia Pacific regions drove the upside. Ecolab is active on the acquisition front and continues to explore opportunities to expand in emerging markets to sustain growth. However, currency fluctuations, challenging economic and market trends and stiff competition remain significant headwinds. As a result, we reiterate our Neutral recommendation on Ecolab and set a target of $115.00.

Overview:

Ecolab, founded in 1923 and headquartered in St. Paul, Minn., is a leading provider of cleaning, sanitizing, food safety and infection prevention products and services. The company serves the foodservice, food and beverage processing, healthcare, and hospitality markets both in the U.S. as well as internationally. The fiscal year at Ecolab coincides with the calendar year.

The company provides cleaning and sanitizing products and programs. Furthermore, Ecolab's offerings include pest elimination, maintenance and repair services. These services are enjoyed mainly by the customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care, commercial facilities management.

Effective from 2013, the company has reorganized its reportable segments to take into account the Nalco merger and to support its strategy of global growth. The company's 10 operating units have been aggregated into 4 reportable segments. They are as follows:

Global Industrial (34.4% of revenues in the first quarter of 2014) consists of the Global Water, Global Food & Beverage, Global Paper and Global Textile Care operating units.

Global Institutional (30.0%) consists of the Global Institutional, Global Specialty and Global Healthcare operating units.

Global Energy (30.4%) consists of the Global Energy operating unit.

Other (5.2%) consists of the Global Pest Elimination and Equipment Care operating units.

Ecolab is currently pursuing two restructuring plans - Energy Restructuring Plan and Combined Restructuring Plan. The Energy Restructuring Plan was undertaken in April 2013, when the company commenced plans to undertake restructuring and other cost-saving actions (following the completion of the acquisition of Champion Technologies) to realize its acquisition-related cost synergies as well as streamline and strengthen Ecolab's position in the fast growing global energy market. The plan includes reduction of the combined business s current global workforce by approximately 500 positions. It also includes reduction of plant and distribution center locations and product line optimization, as well as the reduction of other redundant facilities. The Combined Restructuring Plan is composed of "2011 Restructuring Plan" and "Merger Restructuring Plan (undertaken in Jan 2012). The "2011 Restructuring Plan involves certain restructuring activities in and outside Europe. The "Merger Restructuring Plan" is a result of the merger with Nalco Holding Company, where the company intends to take restructuring actions related to the reduction of its global workforce and optimization of its supply chain and office facilities, including planned reductions of plant and distribution center locations.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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