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Will Global Industrial Unit Boost Ecolab's (ECL) Q3 Earnings?

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Will Global Industrial Unit Boost Ecolab's (ECL) Q3 Earnings?

Solid performance in the Global Industrial segment to drive Ecolab's (ECL) Q3 results.

Ecolab Inc. ECL is scheduled to report third-quarter 2018 results on Oct 30, before market opens.

Solid performance in the Global Industrial segment is likely to drive the top line. Further, an expected improvement in revenues in other segments is likely to generate solid results in the upcoming quarterly results.

Q2 Results at a Glance

In the second quarter, Ecolab reported adjusted earnings of $1.27 per share, in line with the Zacks Consensus Estimate. Earnings also rose 13% on a year-over-year basis.

Adjusted quarterly net sales were $3.69 billion, up 6.6% from the year-ago quarter’s tally. Also, net sales edged past the Zacks Consensus Estimate of $3.70 billion.

Which Way are the Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $3.37 million, reflecting a rise of 6.5% year over year. The Zacks Consensus Estimate for earnings is at 88 cents, indicating an increase of 10% year over year.

In an average, the company delivered positive earnings surprise of 0.9% in the past four quarters.

Let’s delve deeper.

Ecolab Inc. Price and Consensus

 

Ecolab Inc. Price and Consensus | Ecolab Inc. Quote

 

Global Industrial to Drive Q3

Strong performance in the Global Industrial segment is likely to boost Ecolab’s performance in the quarter to be reported. The upside will be 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.

The segment contributed 36% to total revenues in the last reported quarter. Sales in the segment grew 10% year over year to almost $1.33 billion.

For the upcoming quarterly results, the Zacks Consensus Estimate for Global Industrial segment is pegged at $1.37 billion. The figure reflects an increase of 10% from the year-ago quarter’s figure.

Fortifying its foothold in the refining industry, Ecolab’s subsidiary —  Nalco Champion —  entered into an exclusive distribution agreement with XOS, a manufacturer of elemental analysis solutions in August. With the development, Nalco Champion’s flagship 3D CRUDEFLEX automation platform got integrated with XOS’s proprietary Clora Online analyzer.

Other Factors Impacting Q3

Global Institutional – a Key Contributor: Solid prospects in the Global Institutional segment is likely to boost Ecolab’s performance in the quarter to be reported. Per management, solid demand for specialized cleaning and sanitizing products in the hospitality, lodging, healthcare, government, education and retail industries is likely to drive growth in the segment. Operating units in the segment include Institutional, Specialty and Healthcare.

The segment contributed 35.2% to total revenues in the last reported quarter. Sales increased 6% to $1.30 billion led by strong growth in the Specialty business line. The segment witnessed solid growth in North America and Asia Pacific.

For the quarter to be reported, the Zacks Consensus Estimate for the Global Institutional segment is pegged at $1.33 billion, up 8.2% year over year.

Global Energy: Global Energy contributed 22.9% to total revenues in the last reported quarter. Sales rose 6% to $ $845.2 million on strong growth in the well stimulation business and modest gains in the downstream business.

The segment operates under the moniker Nalco Champion. Global Energy caters to the process chemical and water treatment needs of the global petroleum and petrochemical industries in upstream as well as downstream applications.

Solid estimate revision trends in the segment raise optimism. The Zacks Consensus Estimate for revenues segment is pegged at $874 million, reflecting an improvement of 9.7% on a year-over-year basis.

Guidance: For the third quarter, Ecolab expects adjusted earnings in the range of $1.49-$1.57 per share. The current outlook reflects an increase of 8-14% year over year.

Adjusted gross margin for the third quarter is expected to be 42% of net revenues.

Ecolab reiterated guidance for 2018.

The company expects adjusted earnings in the range of $5.30-$5.50 per share. Notably, this represents an increase of 13-18% year over year.

As a percentage of revenues, adjusted gross margin is expected in the range of 41-42% of net revenues.

Earnings Whispers

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. This is not the case here as you will see below.

Earnings ESP: Ecolab has Earnings ESP of -1.94%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ecolab carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat in their upcoming quarterly results.

Luminex Corporation LMNX has an Earnings ESP of +54.76% and a Zacks Rank #3.

Baxter International Inc BAX has an Earnings ESP of +0.90% and a Zacks Rank #2.

Masimo Corporation MASI has an Earnings ESP of +0.98% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

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Ecolab Inc. (ECL) : Free Stock Analysis Report
 
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