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Can Global Industrial Unit Drive Ecolab's (ECL) Q2 Earnings?

Ecolab Inc. ECL is scheduled to report second-quarter 2019 results on Jul 30, before market opens. The company’s core Global Industrial unit is expected to have contributed significantly in the quarter.

Ecolab delivered an earnings surprise of 1% in the last reported quarter, the average of the trailing four quarters being a negative 0.1%.

Which Way Are Q2 Estimates Treading?

For the to-be-reported quarter, the Zacks Consensus Estimate for revenues is pegged at $3.78 billion, suggesting an improvement of 2.3% from a year ago. The same for earnings is at $1.41, indicating an increase of 11% from a year ago.

Ecolab Inc. Price and EPS Surprise

 

Ecolab Inc. Price and EPS Surprise

Ecolab Inc. price-eps-surprise | Ecolab Inc. Quote

Let’s delve deeper.

Global Industrial Likely to Drive Q2

The Global Industrial segment has likely gained from the Water, Food & Beverage and Life Sciences sub-units. Not to forget, the segment accounted for 36.5% of net sales in the last reported quarter.

It is encouraging to note that a slew of recent developments is expected to boost the Global Industrial arm.

For instance, in recent past, the company unveiled a free online tool to help businesses globally in the process of improving water management. Such an enhancement is likely to reflect in the segment’s to-be-reported-quarter performance.

Also, the company launched a Life Sciences cleanroom program in North America, specially developed for pharmaceutical manufacturing. The program provides comprehensive cleaning and disinfection for both sterile and non-sterile applications.

Additionally, Ecolab’s subsidiary, Nalco Water, recently unveiled LegionGuard LG25, which is designed to lower the waterborne pathogen Legionella pneumophila in drinking water systems. (Read More: Ecolab's Nalco Water to Boost Public Health With New Offering)

Reflective of these, the Zacks Consensus Estimate for the segment’s second-quarter earnings is pegged at $1.4 billion, suggesting a year-over-year increase of 3.8%.

Other Factors at Work

The company’s Global Energy and Global Institutional units are expected to see a solid quarter.

The Zacks Consensus Estimate for Global Energy’s second-quarter revenues stands at $880 million, calling for a 3% year-over-year increase. The same for Global Institutional is pinned at $1.34 billion, indicating a rise of 2% from the year-ago quarter.

Ecolab’s industry-leading technologies along with excellent field service to support long-term growth for the company are expected to boost the aforementioned units. Strong international presence is another positive.

Resultantly, Ecolab expects second-quarter adjusted earnings per share (EPS) within $1.36 to $1.46, indicating a rise of 7-15% year over year. The company also projects gross margin at 42%.

However, volatile currency exchange rates are expected to have adversely impacted Ecolab in the second quarter. In fact, second-quarter adjusted EPS is likely to be impacted by 5 cents. Additionally, competition in the chemical specialty market is stiff.

What Our Quantitative Model Suggests

Our proven model clearly indicates that a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to deliver a positive earnings surprise. However, that is not the case here.

Earnings ESP: Ecolab has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ecolab carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

AmerisourceBergen ABC has an Earnings ESP of +0.92% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DENTSPLY SIRONA XRAY has an Earnings ESP of +6.95% and a Zacks Rank #1.

Acadia Healthcare Company, Inc. ACHC has an Earnings ESP of +4.30% and a Zacks Rank #2.

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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 Nasdaq, Inc.

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