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Ecolab (ECL) to Refinance $375M Worth of Notes, Reduce Debt

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Ecolab Inc. (ECL - Free Report) recently announced an offer to exchange its outstanding 5.500% notes due 2041 for up to $375 million. These notes will be exchanged with a newly-issued lower cost 3.950% notes due 2047. The refinancing of debt is a smart move as it will reduce cost of debt and delay maturity of the notes.

Ecolab had an impressive run on the bourses in the last six months, trading above the industry in terms of price performance. The company’s shares have returned 4.1% as compared with the industry’s rise of only 3.7%.

 

 

Recently, Ecolab slashed 2017 earnings guidance due to the impact of hurricanes and the divestiture of the Equipment Care business. The company expects adjusted earnings for the year in the range of $4.65-$4.75, much lower than the previous range of $4.70-$4.90. Notably, Ecolab expects the impact of hurricanes on 2017 sales and costs to be approximately 8 cents. Along with this, the divestiture of Equipment Care is going to hurt earnings by a penny.

Ecolab is a leading provider of water, hygiene and energy technologies and services that protect people and vital resources. The company's programs and services help in promoting safe food, maintaining clean environments, optimizing water and energy use and improving operational efficiencies for customers in the food, energy, healthcare, industrial and hospitality markets in more than 170 countries.

The company’s prospects in the Global Industrial and Global Institutional business segments reflect positivity. In the last reported quarter, sales in these segments scaled 3.8% and 6.6%, respectively, on a year-over-year basis. Further, Ecolab boasts compelling fundamentals with revenues and adjusted earnings multiplying at a rate of 4.6% and 13.7%, in the last three years.

On the flip side, unfavorable foreign currency and the impact of Venezuelan deconsolidation are expected to hurt earnings in the near term. Escalating costs and expenses are weighing on its margins. In October, a comparative study of Ecolab’s forward P/E (forward 12-month basis) multiple reflected that the stock is overvalued.

Zacks Rank & Key Picks

Ecolab currently carries a Zacks Rank #3 (Hold).

A few better-ranked medical stocks are PetMed Express, Inc. (PETS - Free Report) , Align Technology, Inc. (ALGN - Free Report) and Myriad Genetics, Inc. (MYGN - Free Report) . PetMed, Align Technology and Myriad Genetics sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed has a long-term expected earnings growth rate of 10%. The stock has rallied roughly 71.8% over a year.

Align Technology has a long-term expected earnings growth rate of 28.9%. The stock has returned 170.1% over a year.

Myriad Genetics has a long-term expected earnings growth rate of 15%. The stock has returned 87.1% over a year.

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