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Ecolab (ECL) Earnings and Revenues Surpass Estimates in Q3

Ecolab Inc. ECL reported third-quarter 2020 adjusted earnings per share of $1.15, beating the Zacks Consensus Estimate of $1.09 by 5.5%. However, the bottom line declined 24.3% on a year-over-year basis.

Year-over-year decrease in the bottom line was due to COVID-19 associated volume declines, lower operating leverage and unfavorable business mix, which more than offset pricing, lower discretionary spending and cost savings initiatives.

This Zacks Rank #4 (Sell) company’s quarterly net sales were 3.02 billion, down 6.4% from the year-ago figure. However, the top line surpassed the Zacks Consensus Estimate by 1.5%.

Segmental Analysis

With effect from the first quarter, the company has made modifications to the way it reports its segments, as discussed below.

Global Industrial

Sales at the segment fell 1.7% year over year to $1.49 billion. Lower volumes in other Industrial businesses more than offset modest growth in Food & Beverage.

Ecolab Inc. Price, Consensus and EPS Surprise

Ecolab Inc. Price, Consensus and EPS Surprise

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

Global Institutional & Specialty

Sales plunged 21.7% year over year to $722.4, owing to a steep decline in the Institutional business.

Global Healthcare and Life Sciences

Sales at the segment improved 31.5% year over year to $320.9 million, courtesy of higher sales owing to the COVID-19 related demand in both the Healthcare and Life Sciences business lines.

Other

Sales declined 11.6% year over year to $285.7 million.

Margin Analysis

Ecolab reported adjusted gross profit of $1.29 billion, down 12.2% year over year. As a percentage of revenues, adjusted gross margin in the third quarter was 41.7%, down 340 basis points (bps).

Adjusted operating income in the quarter was $456.3 million, down 22.3% year over year. Adjusted operating margin in the quarter was 15.5%, which contracted 270 bps year over year.

Guidance

The company has not issued either quarterly or full-year 2020 outlook due to the continued uncertainty surrounding the COVID-19 pandemic and the full scope of its impact on the global economy and duration of the same.

Full-year 2020 sales in Healthcare & Life Sciences segment are anticipated to exhibit solid growth compared with the previous year. While Industrial segment business sales are anticipated to be under modest pressure, Institutional and Other segments sales are likely to endure substantial pressure though lessening in impact.

The pandemic’s impact on restaurant, hospitality, and entertainment is expected to result in a noticeable decrease in sales for the Institutional division within the Institutional unit and Pest Elimination for the year.

Nonetheless, the company anticipates to see gradual sequential improvement from third-quarter levels with product and service innovation, investments in new hygiene and digital technologies, and successful sales initiatives driving a sustainable recovery in customer activity.

Wrapping Up

Ecolab exited the third quarter on a strong note. The company witnessed weak performance across Global Industrial and Global Institutional business segments in the quarter under review. Contraction in both gross and operating margins raises concern.

Nonetheless, the company displayed substantial sequential improvement despite the COVID-19 impact on its business segments. Moreover, Ecolab’s Global Healthcare and Life Sciences segment exhibited solid performance.

Key Picks

Some better-ranked stocks, which are expected to report earnings soon, are Insulet Corporation PODD, IDEXX Laboratories, Inc. IDXX and Quidel Corporation QDEL.

The Zacks Consensus Estimate for Insulet’s third-quarter 2020 adjusted EPS is currently pegged at 6 cents. The consensus estimate for third-quarter revenues stands at $220.89 million. The company, which currently carries a Zacks Rank #2 (Buy), is expected to release results soon. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

IDEXX currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its third-quarter 2020 adjusted EPS is currently pegged at $1.41. The consensus estimate for third-quarter revenues stands at $666.7 million.

The Zacks Consensus Estimate for Quidel’s third-quarter 2020 revenues is pegged at $476.1 million, suggesting year-over-year improvement of 276.4%. The same for EPS stands at $4.58, indicating growth of 554.3% from the year-ago reported figure. The company currently sports a Zacks Rank #1.

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Ecolab Inc. (ECL): Free Stock Analysis Report
 
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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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