) adjusted earnings per share (excluding special gains and
charges) of $1.04 for the fourth quarter of 2013 rose about 17%
from 89 cents in the same quarter of 2012 but missed the Zacks
Consensus Estimate by a penny. Following the earnings release,
shares of the company have gone up 0.3% after the market closed
on Feb 21.
The rise in adjusted earnings was attributable to strong sales
growth and operating margin gains owing to cost efficiency
programs and synergies. Adjusted net earnings rose nearly 20% to
$318.4 million from $265.9 million in the fourth quarter of 2012.
Revenues grew 16.9% year over year (18% at constant exchange rate
or CER) to $3,559.5 million. Excluding acquisitions and
divestures, adjusted fixed currency revenues increased 6%.
Revenues were slightly higher than the Zacks Consensus Estimate
of $3,537 million.
At CER, revenues from
segment grew 4.5% to $1,283.1 million driven by strong sales in
the Global Food & Beverage and Global Water. Sales growth was
solid in Latin America and Asia-Pacific, while the other regions
posted moderate gains. Operating profit in the segment rose 4.8%
to $181.6 million.
Revenues from the
segment increased 3.7% to $1,073.7 million at CER on the back of
healthy Global Specialty sales. Strong sales in Latin and North
America, and moderate gains in Asia Pacific partially offset soft
sales in Europe, the Middle East and Africa (EMEA). Operating
profit in the segment grew 5.6% to $200.7 million.
segment posted solid revenue growth of 77.5% at CER to $1,062.1
million, mainly driven by the Champion acquisition. Acquisition
adjusted fixed currency revenues increased 12% driven by
impressive growth in the upstream and downstream markets.
Revenues from the
segment inched up 0.6% at CER to $183 million in the 2013-fourth
quarter. After adjusting for divestment of Vehicle Care in the
fourth quarter of 2012, fixed currency sales in the 2013-quarter
increased 6%. The upside was driven by gains from Global Pest
Elimination and Equipment Care businesses. Operating profit in
the segment slid 5.8% to $24.2 million. After adjusting for the
sale of Vehicle Care, fixed currency operating profit declined 2%
due to a deductible on an insurance claim and the write down of
certain field software.
Gross margin decreased 30 basis points to 45.4% in the fourth
quarter, after adjusting for acquisitions and special charges.
Despite a 15.5% rise in adjusted operating profit to $510.5
million, adjusted operating margin dipped 20 bps to 14.3% in the
Full Year Results
For full year 2013, adjusted earnings per share went up 18.8% to
$3.54 from $2.98 in 2012. Revenues in the year rose 11.9% to
ECL exited the year with cash and cash equivalents of $339.2
million, significantly down by 70.7% from $1,157.8 million as of
Dec 31, 2012. Total debt increased 5.5% to $6,904.5 million from
$6,541.9 million as of Dec 31, 2012.
For the first quarter of 2014, ECL expects adjusted gross margin
of 46% and adjusted earnings per share of 71 to 75 cents. The
Zacks Consensus Estimate of 74 cents for the quarter lies within
the guided range.
For full-year 2014, ECL anticipates adjusted gross margin of 46%
and higher adjusted earnings per share between $4.10 and $4.20
compared with 2013. The Zacks Consensus Estimate of $4.15 for the
year lies within the guided range.
Despite earnings missing the Zacks Consensus Estimate, we are
impressed with Ecolab's fourth quarter results. We take note of
the solid 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
ECL currently carries a Zacks Rank #3 (Hold). Some better-ranked
stocks in the industry include
Globe Specialty Metals, Inc.
Sensient Technologies Corp.
). All of these have a Zacks Rank #2 (Buy).
ECOLAB INC (ECL): Free Stock Analysis Report
GLOBE SPECIALTY (GSM): Free Stock Analysis
NEWMARKET CORP (NEU): Free Stock Analysis
SENSIENT TECH (SXT): Free Stock Analysis
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