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Will Ecolab (ECL) Disappoint Investors This Earnings Season?

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Ecolab Inc.ECL is set to report third-quarter 2015 results on Nov 2. Last quarter, the company reported earnings of $1.08 per share, which were in line with the Zacks Consensus Estimate. Notably, Ecolab posted an average negative earnings surprise of 0.31% over the last four quarters.

Let's see how things are shaping up for this announcement.

Factors at Play

Ecolab's presence in international markets exposes the company to macroeconomic problems and currency exchange volatility. Both of these factors are expected to hurt earnings in the third quarter of 2015 and beyond. The combined effect of unfavorable foreign exchange and pension costs is expected to hurt Ecolab's financials.

Meanwhile, pricing pressure, foreign exchange woes and lower oil prices continue to impede top-line growth at the Global Energy segment.

In spite of such adverse factors, the company projects adjusted gross margin in the range of 47% to 48% for third-quarter 2015. Adjusted EPS for quarter is estimated between $1.24 and $1.31 (2% to 8% year-over-year increase).

Earnings Whispers

Our proven model does not conclusively show that Ecolab is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Earnings ESP for Ecolab is -1.55% as the Most Accurate estimate stands at $1.27 while the Zacks Consensus Estimate is pegged higher at $1.29.

Zacks Rank: Ecolab has a Zacks Rank #4 (Sell).

As it is, we caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

CVS Health Corp. CVS with earnings ESP of +1.55% and a Zacks Rank #2.

Opko Health Inc. OPK with earnings ESP of +100.00% and a Zacks Rank #2.

Henry Schein Inc. HSIC with earnings ESP of +1.37% and a Zacks Rank #3.

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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

HENRY SCHEIN IN (HSIC): Free Stock Analysis Report

CVS HEALTH CORP (CVS): Free Stock Analysis Report

OPKO HEALTH INC (OPK): 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.


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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