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Shares of Ecolab (ECL - Analyst Report) achieved a new 52-week high of $95.42 on Sep 10, closing at $95.39 on the same date. The closing price of this leading cleaning and sanitation products maker represented an outstanding one-year return of 50.4% and year-to-date return of 29.1%.

Average volume of shares traded over the last 3 months came in at approximately 1,012K. Currently, the stock trades at a forward P/E of 27.0x, higher than its peer group of 21.45x.

Growth Drivers

The company’s promising second quarter results, along with raised guidance for 2013, sparked investor confidence on the stock. Moreover, a number of recent initiatives to streamline its underlying business, a new research and development (R&D) center in Russia, along with launch of new products in the market, bode well for the company.

Ecolab posted favorable second quarter results with adjusted earnings of 86 cents per share, which beat the Zacks Consensus Estimate of 84 cents by 2.38%, and the year-ago earnings of 72 cents by 19%. Revenues grew 13% to $3,337.8 million, a record high for the company.

Moreover, ECL raised its guidance for 2013, which includes the impact of the acquisition of Champion Technologies. It anticipates 2013 higher adjusted EPS in a range of $3.48−$3.56, compared with the earlier range of $3.45−$3.55, representing a 17%−19% (earlier 16%-19%) rise in earnings.

Further, the company’s aggressive strategy to pursue acquisitions along with its ability to divest non-core, underperforming assets (such as a section of its Mobotec business divested to UK-based The Power Industrial Group), intensifies its focus on profitable niches. In addition, acquired businesses like Champions and Purate complement its diversified product portfolio.

Recently, Ecolab revealed that its Russian arm, Master Chemicals Nalco Champion, a chemical solutions and technologies provider, has opened a 21,500 square-feet large R&D center and regional headquarters in Kazan, Tatarsta. Currently, Kazan is the heart of Russia’s oil and gas industry. The R&D facility’s 4,000 square feet of laboratory space will be utilized for oilfield chemical research and development of chemical solutions for other industries in Russia.

Moving ahead, recently launched products such as the Kay Super Contact Cleaner for the quick service restaurant (QSR) chains, and the Advantis FC Cleaning Program for reduced temperature foam-cleaning in food and protein processing, are expected to drive top-line growth. New account wins, together with increased penetration into emerging markets, are other positive factors boosting investor confidence.

Other Stocks to Consider

Ecolab carries a Zacks Rank #3 (Hold). Some companies from the basic materials sector such as Ferro Corp. (FOE - Snapshot Report), Minerals Technologies (MTX - Snapshot Report) and Sensient Technologies Corporation (SXT - Snapshot Report) are expected to do well. All these stocks carry a Zacks Rank #2 (Buy).

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