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Analyst Actions: Ecolab. Inc. Target Raised $2, Keeps Outperform at Credit Suisse; Shares Slip From Earlier Yr Highs

By: MT Newswires
Posted: 5/1/2013 2:20:00 PM
Referenced Stocks: ECL

Analysts at Credit Suisse have raised their price target on Ecolab Inc. ( ECL ) to $86 from $84, while maintaining its Outperform rating on the stock.

"Following ECL's 1Q13 results, which came in slightly ahead of expectations, and the closing of the Champion acquisition, we are raising our 2013 estimate to $3.52 (from $3.47). The increase mainly reflects the inclusion of Champion and falls in the upper half of ECL's range ($3.45-3.55) as does our 2Q13 EPS estimate of $0.84 (vs. ECL's range of $0.81-0.85). For the core businesses, we are looking for an improvement in Y/Y growth in the Global Energy division (ex-Champion) led by shale, deepwater and oil sands, although in the Global Industrial and Global Institutional areas we are looking for more modest growth as ECL faces some headwinds in markets like paper, lodging and food service. In addition, we are baking in the additional debt that ECL has taken on to close on Champion as well as the completion of the $280 mil remaining on their buyback authorization by year-end. Our 2014/15 estimates move to $4.25/4.95 (from $4.03/$4.60)," said Credit Suisse.

The Stock

"The 2013 outlook for ECL's business remains intact after a solid start in 1Q, and we believe that ECL's FY guidance may prove to be conservative, at least in part helped by a fairly benign raw material environment. To reflect our slightly higher numbers, we are raising our target price to $86 (from $84), which reflects an 11x multiple on our 2014 EBITDA estimate (putting 2013 FCF toward net debt reduction)."

1Q13 Results

"ECL reported 1Q EPS of $0.60 ahead of the Street/us at $0.58 with most of the beat from stronger core operations. Overall, sales of $2.87 bil were in line with our estimate, with sales +2% y/y, led by volumes (+1%) and price (+1%). Leading sales growth was the Global Energy segment with +7.5% growth driven by strong demand in shale while also overcoming a tough comp of 29% growth last year and modest sales declines in the downstream business."

Shares of ECL are flat in afternoon trade at $84.62, in the high end of a 52-week range of $61.45 - $85.16.