Ecolab Inc. (ECL) reported adjusted EPS (excluding special gains, charges and tax benefits) of $1.20 per share, in line with the Zacks Consensus Estimate. EPS increased 15.4% from the year-ago quarter number buoyed by robust sales growth and higher operating income.
Moreover, the company plans to authorize a new share repurchase worth $1 billion in 2015.
Quarter Details
Sales increased 3% year over year to $3.68 billion in the quarter, which missed the Zacks Consensus Estimate of $3.75 billion. The year-over-year growth was driven by strong performance by all segments.
Global Industrial segment sales grew 4% year over year to $1.28 billion, supported by solid gains in Latin America. Global Institutional segment sales increased 6% to $1.12 billion, led by strong sales growth in the specialty business.
Global Energy segment revenues spiked 11% year over year to $1.14 billion in the reported quarter, driven by strong performance in the upstream as well as downstream business. Sales from the Other segment grew 6% year over year to $190.1 million.
Selling, general & administrative expenses (SG&A) increased 2% from the year-ago quarter to almost $2 billion.
Operating income including special gains and charges jumped 11% from the year-ago quarter to $520.5 million. Global Industrial, Global Institutional and Global Energy segment operating profits increased 9%, 13% and 13%, respectively. Operating income at the Other segment surged 22% to $31.9 million.
Ecolab exited the fourth quarter with cash and cash equivalents of $209.6 million. Total debt stood at approximately $6.57 billion as of Dec 31.
Outlook
For first-quarter 2015, Ecolab projects adjusted gross margin at 46%. SG&A expenses, as percentage of sales, are expected to be approximately 34%. Interest expense is forecasted between $60 million and $65 million.
Adjusted EPS is estimated between 78 cents and 83 cents (5% to 12% year-over-year increase). Currently, the Zacks Consensus Estimate for EPS is pegged at 87 cents, which exceeds the high end of the guided range.
For 2015, Ecolab expects adjusted gross margin in the range of 47% to 48%. SG&A expenses, as percentage of sales, are projected to be approximately 32%. Interest expense is forecasted in the range of $240 million to $250 million.
Adjusted EPS is likely to come in between $4.50 and $4.70 (8% to 12% year-over-year increase). Currently, the Zacks Consensus Estimate for the same is pegged at $4.71, which is higher than the high end of the guided range.
Our Take
Ecolab’s fourth-quarter results fail to impress us. We believe aggressive competition from the likes of ServiceMaster (SERV) will continue to hurt the company's results, going forward. Moreover, challenging economic and market trends along with unfavorable internal issues will likely pose near-term headwinds.
Zacks Rank
ECL currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry are Axalta Coating Systems (AXTA) and Penford Corp. (PENX). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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