Ecolab (ECL) Q4 Earnings & Revenues Beat, Margins Decline
Ecolab Inc. ECL has reported fourth-quarter 2022 adjusted earnings per share (EPS) of $1.27, down year over year by a penny. The bottom line, however, beat the Zacks Consensus Estimate by 1.6%.
We had projected fourth-quarter adjusted EPS of $1.20.
GAAP EPS for the quarter was 93 cents, down 10.6% year over year.
Full-year adjusted EPS was $4.49, down 4.3% from the end of 2021. The metric, however, surpassed the Zacks Consensus Estimate by 0.4%.
We had projected full-year adjusted EPS of $4.42.
Revenues grossed $3.67 billion in the reported quarter, up 9.1% year over year. The metric surpassed the Zacks Consensus Estimate by 0.04%.
The fourth-quarter revenue compares to our estimate of $3.64 billion.
Ecolab’s fixed-currency sales increased 15.3%, and acquisition-adjusted fixed-currency sales increased 12% from the prior-year period’s level.
The year-over-year uptick in the fourth quarter’s top line was driven by double-digit pricing that continued to exceed substantial delivered product cost inflation. Also, although volumes outside of Europe were stable versus last year, volumes were impacted by softening demand, particularly in Europe.
Full-year revenues were $14.19 billion, reflecting an 11.4% improvement from the comparable 2021 period. The metric beat the Zacks Consensus Estimate by 0.1%.
Full-year revenues compares to our estimate of $14.16 billion.
The Global Industrial segment’s fixed-currency sales of $1.87 billion reflect 14.2% reported growth, whereas acquisition-adjusted fixed-currency sales moved up 14% year over year. The robust year-over-year uptick was driven by double-digit gains in Food & Beverage, Water, and Paper.
This compares to our projection of fourth-quarter segmental revenues of $1.78 billion.
The Global Institutional & Specialty arm’s fixed-currency sales of $1.16 billion reflect reported growth of 10.8%, whereas acquisition-adjusted fixed-currency sales increased 11% year over year. The continued double-digit growth in the Institutional division reflected strong pricing and business wins. Specialty sales showed robust growth, driven by robust quickservice sales growth and modest gains in food retail.
This compares to our projection of fourth-quarter segmental revenues of $1.15 billion.
The Global Healthcare and Life Sciences arm’s fixed-currency sales of $431.1 million improved 45.2%. Acquisition-adjusted fixed-currency sales increased 7% year over year on the back of double-digit growth in Life Sciences and improved Healthcare sales growth.
This compares to our projection of fourth-quarter segmental revenues of $379.4 million.
The Other segment’s fixed-currency sales of $354.6 million improved 12.3% on a reported basis, while acquisition-adjusted fixed-currency sales jumped 12% year over year. The uptick was led by double-digit growth across all divisions.
This compares to our projection of fourth-quarter segmental revenues of $346.3 million.
Ecolab Inc. Price, Consensus and EPS Surprise
Ecolab Inc. price-consensus-eps-surprise-chart | Ecolab Inc. Quote
In the quarter under review, Ecolab’s gross profit improved 7.2% to $1.42 billion. However, the gross margin contracted 70 basis points (bps) to 38.6%.
We had projected 38% of gross margin for the fourth quarter.
Selling, general and administrative expenses rose 6.2% to $922.1 million year over year.
Adjusted operating profit totaled $494.2 million, increasing 8.9% from the prior-year quarter’s level. Adjusted operating margin in the quarter also contracted 2 bps to 13.5%.
We had projected an 11.5% of adjusted operating margin for the fourth quarter.
Ecolab exited 2022 with cash and cash equivalents of $598.6 million compared with $359.9 million at the end of 2021. Total debt at the end of 2022 was $8.58 billion compared with $8.76 billion at the end of 2021.
Cumulative net cash provided by operating activities at the end of 2022 was $1.79 billion compared with net cash provided by operating activities of $2.06 billion a year ago.
Meanwhile, Ecolab has a consistent dividend-paying history, with five-year annualized dividend growth of 4.67%.
Ecolab has not provided its 2023 outlook. However, it expects to deliver performance that improves throughout 2023 despite a challenging macro environment characterized by high delivered product costs and easing demand.
Ecolab has provided its adjusted EPS outlook for the first quarter of 2023. The company expects first-quarter 2023 adjusted EPS of 82-90 cents. The Zacks Consensus Estimate for the quarter is pegged at 81 cents.
Ecolab exited the fourth quarter of 2022 with better-than-expected results. The company registered a robust year-over-year uptick in its top line, along with solid performances across all segments. Strong volume and pricing momentum are also encouraging. Ecolab’s business wins and innovation pipelines are well-positioned to drive growth and global leadership. The company’s digital capabilities are continuing to broaden, develop and add competitive advantages, which are encouraging. In the reported quarter, Purolite delivered a strong performance, benefiting from its recent capacity additions, which looks promising.
However, the bottom-line performance in the reported quarter is disappointing. The company faced significant delivered product cost inflation and unfavorable currency translation, which weighed on its top-line growth. The contraction of both margins also does not bode well.
Zacks Rank and Other Key Picks
Ecolab currently carries a Zacks Rank #2 (Buy).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. CAH, McKesson Corporation MCK and Hologic, Inc. HOLX.
Cardinal Health, currently carrying a Zacks Rank #2, reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, with a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. The company currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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