Ecolab Earns Recognition

Ecolab Inc. (ECL - Analyst Report), a global sanitation products company, has been added to the Dow Jones Sustainability (DJSI) World Index as well as the DJSI North America Index, based on its commendable sustainability initiatives. The recognition further bolsters Ecolab’s leading position as a world-class provider of cleaning, sanitizing, food safety and infection prevention products and services.

The DJSI ranks large-cap companies, focusing on their financial accomplishments which are inclusive of corporate economic, corporate governance, environmental and social performance, branding, risk management, climate change mitigation, labor practices and supply chain standards. Ecolab was one of the 41 companies, out of a total of 340 companies, which were listed in the 2012—2013 World Index.

The DJSI World Index tracks the top 10% of the world’s largest 2,500 companies and the North America Index covers the top 20% of the 600 largest companies in the U.S. and Canada. Asset managers use these indexes as a reference point to manage sustainability portfolios.

Additionally, again led by its sustainable initiatives, Ecolab has been honored with 'The World’s Most Innovative Companies' title by Forbes magazine in its September, 2012 edition. Ecolab was ranked 31st out of 100 companies listed in the magazine.

Per Forbes, the “innovation premium” on which the companies were evaluated is based on the higher than existing valuation of a stock on the basis of expected innovative results for latest offerings, services and end markets. Moreover, the members were required to have more than $10 billion in market capitalization, 7 years of public data and a minimum investment of 2.5% of revenues on research and development (R&D).

The company has spent $750 million on research, development and engineering (RD&E) in the last 5 years and holds more than 5,300 patents worldwide. Its innovations are directed at improving quality standards of its products in an eco-friendly, cost-efficient environment.

Neutral on Ecolab

We currently have a Neutral recommendation on Ecolab, which carries a short-term Zacks #4 Rank (Sell rating). St. Paul, Minnesota-based Ecolab serves the food service, food and beverage processing, healthcare, and hospitality markets both in the U.S. as well as internationally. We are encouraged by Ecolab’s consistent performance of delivering double-digit earnings growth despite the challenging business environment.

Ecolab continues to invest in strategic areas such health care, food, water and energy and global pest elimination to expand its business. Management is currently emphasizing on product innovation, sales organization, volume growth, appropriate pricing, and merger synergies along with rationalizing operating costs.

Moreover, Ecolab’s growth has been buoyed by its strong international presence, especially in the emerging markets like Asia-Pacific and Latin America. Despite the impressive strong international exposure, we remain cautious on Ecolab owing to the aggressive competition from the likes of Clorox (CLX - Analyst Report) and Church & Dwight (CHD - Snapshot Report). Raw material price inflation and higher delivered product cost continue to be headwinds for the company.