The Board of leading cleaning and sanitation products company Ecolab Inc (ECL) has authorized the buyback up to 10 million additional shares of its common stock. The Minnesota-based company had roughly 18 million shares remaining under its previous authorization.
The authorization will come into effect following the closure of Ecolab’s previously announced acquisition of water treatment company Nalco Holding Company (NLC). The cumulative authorization following the consummation of the Nalco deal would be 28 million.
The repurchase is expected to be executed from time to time in privately negotiated transactions based on market conditions. Ecolab’s Board last raised the stock repurchase authorization in May 2011.
Ecolab remains committed to deliver incremental returns to investors leveraging a solid balance sheet, healthy cash flow and earnings stability. The company bought back roughly 2.4 million shares during first-half 2011.
Ecolab leads in cleaning, sanitizing, pest elimination and food safety solutions with annual sales of roughly $6 billion. The company is investing in strategic areas such as product innovation and sales organization while rationalizing operating costs to enhance margins.
During the second quarter earnings call, Ecolab raised its earnings forecast for 2011. The company expects its quarterly profit in second-half 2011 to be boosted by higher sales volume, pricing, margin leverage, new products as well as synergies from acquisitions and European restructuring.
While Ecolab’s strong international exposure (especially in emerging markets) and recovery across its end-markets are encouraging, aggressive competition and raw material inflation remain a concern. We are also cognizant about the potential dilutive impact of the hefty restructuring expenses on the company’s bottom line, partly offset by its expanded share buyback initiative.
Currently, we have a long-term Neutral rating on Ecolab, which is supported by a short-term Zacks #3 Rank (Hold).
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