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Ecolab (ECL) Misses on Q3 Earnings & Revenues, Lowers View

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Ecolab (ECL) Misses on Q3 Earnings & Revenues, Lowers View

Ecolab (ECL) misses estimates despite strong growth in Global Industrial and Global Institutional; 2018 guidance dull.

Ecolab Inc ECL reported third-quarter 2018 adjusted earnings of $1.53 per share, which missed the Zacks Consensus Estimate of $1.55. Earnings also rose 10.9% on a year-over-year basis.

Ecolab carries a Zacks Rank #3 (Hold).

Quarterly net sales amounted to $3.75 billion, up 5% from the year-ago quarter’s tally. Net sales marginally missed the Zacks Consensus Estimate of $3.77 billion.

Ecolab Inc. Price and Consensus

 

Ecolab Inc. Price and Consensus | Ecolab Inc. Quote

Segmental Analysis

Global Industrial

Sales in the segment grew 8% year over year to almost $1.41 billion. The upside was driven by major gains in the Water, Food & Beverage and Life Sciences units. Europe, North America and Latin America drove the Global Industrial regional growth.

Global Institutional

Sales improved 6% to $1.34 billion, led by strong growth in the Specialty business. The segment witnessed solid growth in the Specialty unit. North America and Asia Pacific witnessed strong growth in the quarter.

Global Energy

Sales in the segment rose 9% to $889.6 million, owing to strong growth in the well stimulation business and modest gains in the downstream business.

Other

Sales declined 6% year over year to $232.9 million. However, the segment witnessed strong gains in both Pest Elimination and Colloidal technologies.

Margin Analysis

Ecolab registered gross profit of $1.55 billion, up 3.1% year over year. As a percentage of revenues, gross margin in the quarter was 41.3%, down 80 basis points year over year.

Selling, general and administrative expenses totaled $955.2 million, up 3% year over year.

Guidance

Ecolab lowered guidance for 2018.

The company expects adjusted earnings in the range of $ 5.20-$5.30 per share, lower than the previous guidance of $5.30-$5.50. Notably, this represents an increase of 11-13% year over year. The Zacks Consensus Estimate is currently pegged at $5.37, which is above the given range.

As a percentage of revenues, adjusted gross margin is expected to be 41% of net revenues.

For the fourth quarter of 2018, Ecolab expects adjusted earnings in the range of $1.49-$1.59 per share. The current outlook reflects an increase of 8-15% year over year. The Zacks Consensus Estimate is currently pegged at $1.55 per share, which lies above the guidance.

Adjusted gross margin for the fourth quarter of 2018 is expected to be 41% of net revenues.

Wrapping Up

Ecolab ended the third quarter on a dull note, missing the Zacks Consensus Estimate for earnings and revenues. Despite strength in the Pest Elimination business and Colloidal technologies, the Other segment declined year over year on a reported basis. Ecolab operates in highly-competitive markets, which might dull prospects over the long haul. Ecolab faces pricing pressure in the Energy segment, which is likely to hurt profits. The company lowered guidance for 2018.

Ecolab has also undertaken a cost-efficiency initiative that is expected to result in approximately $200 million of SG&A savings by 2021. Europe, North America and Latin America drove Global Industrial regional growth in the quarter. Strength in the Global Institutional segment led by growth in the Specialty and Healthcare business lines is also a positive. Robust product portfolio and an expanding customer base are likely to drive organic sales over the long haul.

Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season are, Stryker Corporation SYK, Intuitive Surgical, Inc ISRG and Merit Medical Systems, Inc MMSI.

All the three companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.83 per share in the third quarter of 2018, which beat the Zacks Consensus Estimate of $2.65. Adjusted earnings improved 1.8% year over year.

Stryker delivered third-quarter 2018 adjusted earnings per share (EPS) of $1.69, which beat the Zacks Consensus Estimate of $1.68. Earnings improved 11.2% year over year, within the company’s guidance.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, beating the Zacks Consensus Estimate of 42 cents. Adjusted earnings improved 46.9% from the year-ago quarter’s tally.

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