Ecolab (ECL) Up 0.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Ecolab (ECL). Shares have added about 0.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ecolab due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ecolab Q1 Earnings Beat Estimates, View Impressive
Ecolab reported first-quarter 2019 adjusted earnings per share (EPS) of $1.03, beating the Zacks Consensus Estimate by a penny. EPS rose 19.8% on a year-over-year basis. Per management, the company faced a headwind of 4 cents due to unfavorable currency movement.
The company’s quarterly net sales amounted to $3.51 billion, up 1% from the year-ago quarter tally. Net sales fell short of the Zacks Consensus Estimate of $3.57 billion. Acquisition and divestiture adjusted fixed currency sales increased 3% year over year.
Segmental Analysis
Global Industrial
Sales at the segment grew 4.5% year over year to almost $1.28 billion driven by major gains from the Water, Food & Beverage and Life Sciences units.
Global Institutional
Sales improved 0.2% to $1.21 billion, led by strong growth in the Specialty business. Sales for the segment showed solid growth in Latin America and Asia Pacific despite being impacted by lower distributor shipments in North America.
Global Energy
Sales at the segment declined 4% to $809.5 million. The upstream sales were hurt by declines in the well stimulation business and production sales, reflecting reduced North American industry activity. Downstream sales also declined due to lower equipment sales.
Other
Sales rose 5.3% year over year to $206.1 million, reflecting strength in Pest Elimination and Colloidal Technologies in North America.
Margin Analysis
Ecolab registered gross profit of $1.41 billion, up 0.8% year over year. As a percentage of revenues, gross margin in the quarter was 40.2%, down 10 basis points year over year. On an adjusted basis, gross margin in the quarter was 40.3%, flat year over year.
Adjusted operating income in the quarter was $415.5 million, up 11.8% year over year. Adjusted operating margin of 11.7% expanded 80 bps year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Ecolab has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ecolab has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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