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Here's Why You Should Hold on to Ecolab (ECL) Stock Now

Zacks Equity Research

Ecolab Inc. ECL continues to benefit from robust product portfolio, strong international presence and continued solid performance at the Global Industrial segment. However, forex remains a concern.

The stock carries a Zacks Rank #3 (Hold).

Price Performance

Shares of Ecolab have gained 33.9% year to date, outperforming the industry’s growth of 11.7%. Meanwhile, the S&P 500 Index rallied 18.4% in the meantime.



What’s Deterring the Stock

Given Ecolab’s strong international presence and volatility in foreign currency exchange rates continue to plague the stock’s overall performance. We believe that volatile foreign currency exchange rates will remain a significant headwind in 2019 and beyond.

In fact, management at Ecolab expects foreign currency translation to have an unfavorable impact of 11 cents on 2019 EPS. Additionally, third-quarter EPS is likely to be impacted by 2 cents.

What’s Favoring the Stock

Ecolab continues to gain from robust product portfolio, thereby boosting overall results. The company has major launches underway including the new Smartpowerware wash platform, which is expected to drive institutional improvements. Moreover, the company continues to invest significantly in customer-oriented and infrastructure technology.

Further, Ecolab has been gaining traction in digital technology markets. Per management, new additions in the company’s portfolio will help it to reach its mid-teens EPS growth goal beyond 2019.

The company has significant presence in the international market, with its largest international operations in Europe, Asia-Pacific, Latin America and Canada. We expect this momentum to continue in the future on the back of solid performance from emerging markets.

Global Industrial segment continues to drive its growth. In fact, in the second quarter of 2019, sales at this segment improved 4% year over year to almost $1.38 billion in the second quarter. The upside was driven by major gains in Water and Life Sciences units. Geographically, all regions showed impressive sales growth in the quarter.

Which Way are Estimates Headed?

For 2019, the Zacks Consensus Estimate for revenues is pegged at $15.21 billion, indicating an improvement of 3.7% from the year-ago quarter. The same for earnings per share stands at $5.91, suggesting growth of 12.6% from the year-ago reported figure.

Key Picks

Some better-ranked stocks from the broader medical space are Baxter International Inc. BAX, Amedisys, Inc. AMED and CONMED Corporation CNMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Baxter has a long-term earnings growth rate of 12.8%.

Amedisys has a long-term earnings growth rate of 16.3%.

CONMED has a long-term earnings growth rate 14.9%.

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