Ecolab Inc. (ECL) is set to release its 2014-second quarter results on Jul 29, before the opening bell. In the last quarter, the company posted a neutral surprise. Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
Ecolab’s consistent delivery of double-digit earnings growth despite the current challenging business environment continues to be impressive. One can derive comfort from the company’s large base of recurring revenues and its industry-leading technologies along with excellent field service, to support long-term growth for the company.
Ecolab expects cumulative cost savings from the Energy Restructuring Plan of at least $80 million in 2014, with annual cost savings and synergies of $150 million by the 2015-end. In the first quarter of 2014, the Energy Restructuring Plan has achieved roughly $15 million in savings.
Ecolab also anticipates cumulative cost savings and synergies from the Combined Restructuring Plan of at least $325 million in 2014. In the first quarter of 2014, the Combined Restructuring Plan has achieved about $25 million in savings.
For the second quarter of 2014, Ecolab expects adjusted gross margin of 46% and adjusted earnings per share of $1.00 to $1.04. The Zacks Consensus Estimate of $1.02 lies within the guided range.
For full year 2014, Ecolab anticipates adjusted gross margin of 47% and reiterated its higher adjusted earnings per share between $4.10 and $4.20 compared with 2013. The Zacks Consensus Estimate of $4.18 lies within the guided range.
Earnings Whispers?
Our proven model does not conclusively show that Ecolab is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: Earnings ESP, the difference between the Most Accurate Estimate of $1.02 and the Zacks Consensus Estimate of $1.02, stands at nil.
Zacks Rank #3 (Hold): The combination of Ecolab’s Zacks Rank #3 (Hold) and no ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Sirona Dental Systems Inc. (SIRO), Earnings ESP of 1.04% and a Zacks Rank #2 (Buy).
Hospira Inc. (HSP), Earnings ESP of 1.79% and a Zacks Rank #2 (Buy).
Wright Medical Group Inc. (WMGI), Earnings ESP of 8.89% and a Zacks Rank #2 (Buy).
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