We reiterate our Neutral rating on
). Its first quarter 2012 adjusted earnings per share of 50 cents
beat the Zacks Consensus Estimate of 48 cents. Revenues of $2,810.9
million were ahead of the Zacks Consensus Estimate of $2,718
The company's Global Energy and Latin American franchises along
with Food & Beverage, U.S. Institutional and Global Water units
have been generating positive results. Revenues from the company's
larger U.S. Cleaning & Sanitizing segment climbed 4% year over
year to $709 million in the reported quarter, driven by its Food
& Beverage and Institutional divisions.
In constant currency, revenues from Ecolab's International
segment increased 3% to $733 million backed by solid sales in Latin
America. Global Water sales, in constant currency, were $498
million, driven by growth in metals, mining and food and beverage
Ecolab acquired Nalco Holding Company on December 1, 2011 in a
cash and stock deal worth roughly $8.3 billion. The deal marked the
union of Nalco's market leadership in water and energy services
with Ecolab's competency in food safety and cleaning. The merger
has enabled the combined entity to address major trends such as
growing food demand and food safety, water scarcity, rising energy
demand and aging population's need for health care.
To boost growth, Ecolab continues to invest in key areas while
rationalizing operating costs. It is also active on the acquisition
front and continues to explore opportunities to expand into
emerging markets for growth.
However, Ecolab's profits tumbled in the first quarter, as
charges associated with restructuring and the Nalco acquisition
more than offset growth in sales. While Ecolab will eventually
benefit from the meaningful savings to be realized from its
restructuring in Europe and the newly commenced Merger
Restructuring Plan, associated expenses will continue to drag down
its bottom line. In total, the European and the merger-related
restructuring are expected to cost Ecolab roughly $150 million and
$180 million, respectively.
Also, higher delivered product cost hurt the bottom line in the
quarter, partly offset by solid sales and pricing growth,
synergies, cost efficiency, and new account wins.
Ecolab operates in highly competitive markets. The company's
U.S. Cleaning & Sanitizing and International divisions face
stiff competition from
Church & Dwight
). Our recommendation on the stock is supported by a short-term
Zacks #3 Rank (Hold).
CHURCH & DWIGHT (CHD): Free Stock Analysis
CLOROX CO (CLX): Free Stock Analysis Report
ECOLAB INC (ECL): Free Stock Analysis Report
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