Ecolab Inc ECL reported second-quarter 2018 adjusted earnings of $1.27 per share, in line with the Zacks Consensus Estimate. Earnings also rose 13% on a year-over-year basis.
Ecolab carries a Zacks Rank #4 (Sell).
Adjusted quarterly net sales were $3.69 billion, up 6.6% from the year-ago quarter’s tally. Also, net sales edged past the Zacks Consensus Estimate of $3.70 billion.
Ecolab Inc. Price, Consensus and EPS Surprise
Segmental Analysis
Global Industrial
Sales in the segment grew 10% year over year to almost $1.33 billion. Acquisition adjusted fixed currency sales in the segment were $1.35 billion, up 5% year over year.
The upside was driven by major gains in the Water, Food & Beverage and Life Sciences unit. Europe, North America and Latin America drove the Global Industrial regional growth.
However, acquisition-adjusted fixed currency operating income in the segment fell 2% on a year-over-year basis due to higher delivered product costs and massive investments in the business.
Global Institutional
Sales improved 6% to $1.3 billion, led by strong growth in the Specialty business. Acquisition adjusted fixed currency sales in the segment were $1.31 billion, up 3% year over year.
The segment witnessed solid growth in Specialty unit. North America and Asia Pacific witnessed strong growth in the quarter.
Acquisition adjusted fixed currency operating income declined 2% year over year, thanks to higher delivered product costs.
Global Energy
Sales in the segment rose 6% to $845.2 million, owing to strong growth in the well stimulation business and modest gains in the downstream business. Acquisition adjusted fixed currency sales in the segment were $854 million, up 6% year over year.
Acquisition adjusted fixed currency operating income rallied 29%, courtesy of volume gains, favorable pricing and a solid product mix.
Other
Sales declined 7% year over year to $220.5 million. Acquisition adjusted fixed currency sales in the segment were $222.3 million, up 8% year over year. Sales in this segment witnessed robust growth in North America.
Guidance
Ecolab reiterated guidance for 2018.
The company expects adjusted earnings in the range of $5.30-$5.50 per share. Notably, this represents an increase in the band of 13-18% year over year. The Zacks Consensus Estimate is currently pegged at $5.40, which lies within the range.
As a percentage of revenues, adjusted gross margin is expected in the range of 41-42% of net revenues.
For the third quarter of 2018, Ecolab expects adjusted earnings in the range of $1.49-$1.57 per share. The current outlook reflects an increase of 8-14% year over year. The Zacks Consensus Estimate is currently pegged at $1.59 per share, which lies above the guidance.
Adjusted gross margin for the third quarter of 2018 is expected to be 42% of net revenues.
In Conclusion
Ecolab ended the second quarter on a favorable note, meeting the Zacks Consensus Estimate for earnings. Despite strength in the Pest Elimination business, the Other segment declined year over year on a reported basis. Ecolab operates in highly competitive markets, which might mar prospects over the long haul. Ecolab faces pricing pressure in the Energy segment, which is likely to hurt profits.
On the brighter side, a strong guidance instills optimism on the stock.
Ecolab has also undertaken a cost-efficiency initiative that is expected to result in approximately $200 million of SG&A savings by 2021. As a result of this, Ecolab expects to incur pre-tax charges of $170 million ($130 million after tax) over the next three years.
Europe, North America and Latin America drove Global Industrial regional growth in the quarter. Strength in the Global Institutional segment led by growth in the Specialty and Healthcare business lines is also a positive. Robust product portfolio and an expanding customer base are likely to drive organic sales over the long haul.
Q2 Earnings of MedTech Majors at a Glance
A few better-ranked stocks in the broader medical space, which reported solid earnings this season are, Stryker Corporation SYK, Intuitive Surgical, Inc ISRG and Illumina, Inc ILMN.
While Intuitive Surgical and Illumina sport Zacks Rank #1 (Strong Buy), Stryker carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical reported adjusted earnings of $2.76 per share in the second quarter of 2018, which beat the Zacks Consensus Estimate of $2.48. Adjusted earnings improved 38% year over year.
Stryker reported second-quarter 2018 adjusted earnings per share of $1.76, beating the Zacks Consensus Estimate by 1.7%. Earnings improved 15% year over year and also exceeded the high end of the company’s guidance.
Illumina reported adjusted earnings of $1.43 per share beating the Zacks Consensus Estimate of $1.11.
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