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Why Is Ecolab (ECL) Up 5.6% Since Last Earnings Report?

Zacks Equity Research
Blackstone Group (BX) closed at $40.65 in the latest trading session, marking a -1.22% move from the prior day.

It has been about a month since the last earnings report for Ecolab (ECL). Shares have added about 5.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ecolab due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Ecolab’s Q4 Earnings Match Estimates, Global Industrial Up Y/Y

Ecolab reported fourth-quarter 2018 adjusted earnings per share (EPS) of $1.54, in line with the Zacks Consensus Estimate. EPS rose 11.6% on a year-over-year basis.

The company’s quarterly net sales amounted to $3.76 billion, up 3.1% from the year-ago quarter tally. Net sales were also in line with the Zacks Consensus Estimate.

Segmental Analysis

Global Industrial

Sales at the segment grew 8.1% year over year to almost $1.46 billion driven by major gains from the Water, Food & Beverage and Life Sciences units.

Global Institutional

Sales improved 5.6% to $1.33 billion, led by strong growth in the Specialty business. The segment witnessed solid growth in North America, Asia Pacific and Latin America in the quarter.

Global Energy

Sales at the segment rose 4.1% to $911.1 million owing to modest gains from both upstream and downstream businesses.

Other

Sales rose 2.3% year over year to $225 million, reflecting strength in Pest Elimination and Colloidal Technologies in North America.

Margin Analysis

Ecolab registered gross profit of $1.54 billion, up 1.6% year over year. As a percentage of revenues, gross margin in the quarter was 41.1%, down 60 basis points year over year.

Selling, general and administrative expenses totaled $948.8 million, down 1.4% year over year.

Guidance

Ecolab expects 2019 adjusted EPS within $5.80 to $6.00, showing a 10% to 14% rise over 2018 figure.

Adjusted tax rate is expected at 20-21%.

For the first quarter of 2019, adjusted EPS is projected within 98 cents to $1.06, reflecting year-over-year growth of 8% to 16%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Ecolab has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Ecolab has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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