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Ecolab (ECL) Reports Preliminary Q4 Results, Issues Guidance

Zacks Equity Research

Prior to the fourth-quarter earnings release, Ecolab Inc. ECL announced preliminary fourth-quarter results, wherein adjusted earnings per share (EPS) is likely to increase 11.6% year over year to $1.54. This is marginally below the Zacks Consensus Estimate of $1.55.

On a full-year basis, adjusted EPS is expected to climb 12.2% to $5.25 from 2017, in line with the Zacks Consensus Estimate.

The fourth-quarter 2018 results are scheduled to release on Feb 19, before market opens.

Ecolab’s preliminary fourth-quarter results weren’t applauded by investors. Following the announcement, shares of the Zacks Rank #3 (Hold) company fell 0.4% to $158.61 at close.

Over the past year, shares of Ecolab have rallied 24.2%, higher than the industry's 5.6% growth. The current level is also better than the S&P 500’s rally of 6.2%.

Outlook

Ecolab expects revenues to be strong in 2019, with growth across all segments.

On a full-year basis, the company expects adjusted EPS within $5.80 to $6.00, mirroring growth of 10-14% from 2018. The midpoint of the latest guidance of $5.90 is marginally below the Zacks Consensus Estimate of $5.91.

Other Major Developments

Ecolab plans to spin off Upstream Energy sub-unit as a stand-alone publicly-traded company by mid-2020. This is likely to make the Upstream Energy business a market-leading pure-play global provider of oil and gas production, drilling, and completion product and service solutions. For investors’ notice, the Upstream Energy sub-unit currently forms part of Ecolab’s core Energy segment.

For 2018, Ecolab expects sales of $2.4 billion and operating income of $170 million from the sub unit.

Additionally, Ecolab raised the target for its previously announced efficiency initiative. The benefits of the efficiency initiative are now estimated at $325 million compared with the previous forecast of $200 million. These additional savings are expected to build through 2019 with greater impact in 2020 and 2021.

Key Picks

A few better-ranked stocks in the broader medical space are Penumbra, Inc. PEN, Wright Medical Group N.V. WMGI and DexCom. Inc. DXCM. Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Penumbra’s long-term earnings growth rate is expected at 20%.

Wright Medical’s long-term earnings growth rate is expected at 11%.

DexCom’s next-quarter earnings per share are projected to grow 56.3%.

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