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Can Global Industrial Unit Aid Ecolab's (ECL) Q4 Earnings?

Zacks Equity Research

Ecolab Inc. ECL is scheduled to report fourth-quarter 2018 results on Feb 19, before market opens.

Solid Global Industrial segment performance is likely to drive the top line. Further, an expected improvement in revenues in other segments is likely to drive results in the quarter to be reported.

Q3 Results at a Glance

In the last reported quarter, the company reported adjusted earnings per share of $1.53, which fell short of the Zacks Consensus Estimate of $1.55. Earnings rose 10.9% on a year-over-year basis.

Revenues totaled $3.75 billion, up 5% from the year-ago quarter tally. Net sales marginally missed the Zacks Consensus Estimate of $3.77 billion.

Which Way Are Q4 Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $3.76 million, reflecting a rise of 3% year over year. The same for earnings is at $1.55, indicating an increase of 11.5% year over year.

The company has average positive earnings surprise of 0.4% for the past four quarters.

Let’s delve deeper.

Global Industrial Likely to Drive Q4

The upside in the Global Industrial segment is likely to be driven by major gains from the Water, Food & Beverage and Life Sciences sub-units.

In the last reported quarter, the segment contributed 37.6% to net revenues. Sales in the unit grew 8% year over year to almost $1.41 billion.

The Zacks Consensus Estimate for Global Industrial segment revenues is pegged at $1.40 billion. The figure reflects an increase of 8.5% from the year-ago quarter.

Management at Ecolab expects similar or better results from the segment in the quarter to be reported.

Ecolab Inc. Price and EPS Surprise

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

Other Factors Impacting Q4

Preliminary Results

This Minnesota-based provider of water, hygiene and energy technologies and services has announced preliminary fourth-quarter results. Notably, adjusted earnings per share are likely to increase 11.6% year over year to $1.54, falling marginally short of the Zacks Consensus Estimate. (Read More: Ecolab Reports Preliminary Q4 Results, Issues Guidance)

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For the fourth quarter of 2018, Ecolab expects adjusted earnings per share in the range of $1.49-$1.59. Though the current outlook reflects an increase of 8-15% year over year, the midpoint of the guidance of $1.54 is slightly below the Zacks Consensus Estimate.

However, the adjusted gross margin is expected to be 41% of net revenues.

Meanwhile, for 2018, the company expects adjusted earnings per share in the band of $5.20-$5.30, mirroring an increase of 11-13% from 2017. The midpoint of the guidance of $5.25 is in line with the Zacks Consensus Estimate.

Global Institutional & Global Energy Q4 Sales Likely to Rise

The other two segments of Ecolab — Global Institutional and Global Energy — are also expected to put up a solid show.

In the last reported quarter, Global Institutional accounted for 35.7% of net revenues. Sales in the unit totaled $1.34 billion, up 6% year over year.

For the fourth quarter of 2018, the Zacks Consensus Estimate for the unit’s sales is pegged at $1.30 billion, up 6.7% from the year-ago quarter.

Meanwhile, Global Energy sales contributed 23.7% to Ecolab’s third-quarter sales. The segment posted revenues of $889.6 million, up 9% year over year.

For the fourth quarter of 2018, the Zacks Consensus Estimate for the unit’s sales is pinned at $904 million, up 6% from the prior-year quarter.

Earnings Whispers

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. That is not the case here as you will see below.

Earnings ESP: Ecolab has Earnings ESP of -0.19%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ecolab carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat in their upcoming quarterly results.

Masimo Corporation MASI has an Earnings ESP of +1.04% and a Zacks Rank #3.

Medidata Solutions, Inc. MDSO has an Earnings ESP of +0.54% and a Zacks Rank #3.

Wright Medical Group N.V. WMGI has an Earnings ESP of +58.24% and a Zacks Rank #2.

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