Markets
ECL

Why Is Ecolab (ECL) Up 3.7% Since Its Last Earnings Report?

An image of a pen on a stock chart
Credit: Shutterstock photo

It has been about a month since the last earnings report for Ecolab Inc.ECL . Shares have added about 3.7% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ECL due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Ecolab reported fourth-quarter 2017 adjusted earnings of $1.39 per share, which missed the Zacks Consensus Estimate by a penny. Earnings improved from $1.25 in the year-ago quarter.

Including net discrete tax benefit from U.S. Tax Reform of 55 cents per share, Ecolab registered earnings of $1.93 on reported basis.

Adjusted quarterly net sales were $3.56 billion, up 7.2% from the year-ago quarter. Also, net sales missed the Zacks Consensus Estimate of $3.62 billion.

Segmental Analysis

Global Industrial Segment

Sales in the segment grew 6.1% year over year to almost $1.29 billion. The upside was driven by major gains in Water, Food & Beverage and Life Sciences unit.

Europe, North America and Latin America led the Global Industrial regional growth. Acquisition-adjusted fixed currency operating income improved 4% on a year-over-year basis.

Global Institutional Segment

Sales increased 8.5% to $1.22 billion, led by strong growth in the Specialty business line. The segment witnessed solid growth in North America and Asia Pacific.

Acquisition-adjusted fixed currency operating income remained flat year over year.

Global Energy Segment

Sales rose 10.8% to $853.2 million owing to strong growth in the well stimulation business and modest gains in the downstream business.

Acquisition-adjusted fixed currency operating income increased 4% year over year.

Other Segment

Sales declined 6.8% year over year to $189.7 million. Sales in this segment witnessed robust growth in North America.

Margin Analysis

As a percentage of revenues, Ecolab registered adjusted gross margin of 47.1% in the fourth quarter, down 100 basis points (bps) on a year-over-year basis.

Adjusted operating margin in the fourth quarter contracted 70 bps to 16.2% of net revenues.

Outlook

Ecolab expects full-year 2018 adjusted earnings in the range of $5.25-$5.45 per share, up 12-16% year over year.

As a percentage of revenues, adjusted gross margin is expected in the range of 47-48%.

For the first quarter of 2018, Ecolab expects adjusted earnings in the range of 85-93 cents per share, up from the previous range of 84-92 cents. The current outlook reflects an increase of 6-16% year over year.

Adjusted gross margin for the first quarter of 2018 is expected to be 46% of net revenues.

Ecolab recently took over Jianghai Environmental Protection Co. Ltd. (Jianghai), an industrial water treatment company headquartered in Changzhou, China.

How Have Estimates Been Moving Since Then?

In the past month , investors have witnessed a downward trend in fresh estimate. There have been three revisions higher for the current quarter compared to four lower.

Ecolab Inc. Price and Consensus

Ecolab Inc. Price and Consensus | Ecolab Inc. Quote

VGM Scores

At this time, ECL has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, ECL has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Ecolab Inc. (ECL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ECL

Other Topics

Earnings

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More