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Ecolab (ECL) Earnings and Revenues Match Estimates in Q4

Zacks Equity Research

Ecolab Inc (ECL) 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.

This Zacks Rank #3 (Hold) 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.

2018 at a Glance

Full-year revenues totaled $14.67 billion, which matched the Zacks Consensus Estimate. Revenues rose 6% from 2017.

Adjusted EPS was $5.25, in line with the Zacks Consensus Estimate and up 12.2% from 2017.

Ecolab reports in four segments ??? Global Industrial, Global Institutional, Global Energy and Other.

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.

The mid-point of the guidance of $5.90 billion is marginally below the Zacks Consensus Estimate of $5.92 billion.

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%. The mid-point of the guidance of $1.02 is slightly below the Zacks Consensus Estimate of $1.03.

Wrapping Up

Ecolab ended the fourth quarter on a strong note. The company continues to gain from its core Global Industrial segment, which saw a solid fourth quarter. Ecolab also gained from strength in Pest Control and Colloidal technologies in the quarter, which drove its other segment. Management is also optimistic about the spin-off of its Upstream Energy business as a standalone publicly-traded company. Ecolab’s cost-efficiency initiative is expected to result in approximately $200 million of SG&A savings by 2021. North America, Asia Pacific and Latin America drove Global Institutional unit in the quarter.

On the flip side, contraction in gross margin in the quarter is discouraging. Ecolab operates in highly competitive markets, which might mar prospects over the long haul. Ecolab faces pricing pressure in the Energy segment, which is also likely to hurt profits.

Earnings of MedTech Majors at a Glance

Some better-ranked MedTech stocks that posted solid quarterly results are Varian Medical Systems (VAR), AngioDynamics (ANGO) and CONMED Corporation (CNMD).

Varian reported fiscal first-quarter adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which surpassed the consensus estimate by 2.9%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million beat the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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Ecolab Inc. ECL 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.

This Zacks Rank #3 (Hold) 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.

2018 at a Glance

Full-year revenues totaled $14.67 billion, which matched the Zacks Consensus Estimate. Revenues rose 6% from 2017.

Adjusted EPS was $5.25, in line with the Zacks Consensus Estimate and up 12.2% from 2017.

Ecolab reports in four segments, Global Industrial, Global Institutional, Global Energy and Other.

Ecolab Inc. Price, Consensus and EPS Surprise

Ecolab Inc. Price, Consensus and EPS Surprise | Ecolab Inc. Quote

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.

The mid-point of the guidance of $5.90 billion is marginally below the Zacks Consensus Estimate of $5.92 billion.

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%. The mid-point of the guidance of $1.02 is slightly below the Zacks Consensus Estimate of $1.03.

Wrapping Up

Ecolab ended the fourth quarter on a strong note. The company continues to gain from its core Global Industrial segment, which saw a solid fourth quarter. Ecolab also gained from strength in Pest Control and Colloidal technologies in the quarter, which drove its other segment. Management is also optimistic about the spin-off of its Upstream Energy business as a standalone publicly-traded company. Ecolab’s cost-efficiency initiative is expected to result in approximately $200 million of SG&A savings by 2021. North America, Asia Pacific and Latin America drove Global Institutional unit in the quarter.

On the flip side, contraction in gross margin in the quarter is discouraging. Ecolab operates in highly competitive markets, which might mar prospects over the long haul. Ecolab faces pricing pressure in the Energy segment, which is also likely to hurt profits.

Earnings of MedTech Majors at a Glance

Some better-ranked MedTech stocks that posted solid quarterly results are Varian Medical Systems VAR, AngioDynamics ANGO and CONMED Corporation CNMD.

Varian reported fiscal first-quarter adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which surpassed the consensus estimate by 2.9%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million beat the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.”

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