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We have reiterated our Neutral recommendation on Ecolab Inc. (ECL - Analyst Report) with a price target of $76.0.

Its third quarter 2012 adjusted earnings per share of 87 cents were in line with the Zacks Consensus Estimate. On a fixed currency basis, revenues grew 7% to $3,023.3 million compared with the year-ago pro forma fixed currency sales (inclusive of the Nalco operations). However, revenues were lower than the Zacks Consensus Estimate of $3,086 million.

Revenue growth in the reported quarter was triggered by higher sales from Global Energy, Healthcare, and worldwide Kay as well as the Pest Elimination franchises. Latin America represents key growth area for the company’s overseas operation.

The St. Paul, Minnesota-based company is a leading provider of cleaning, sanitizing, food safety and infection prevention products and services. The company serves the foodservice, food and beverage processing, healthcare, and hospitality markets in the U.S. as well as internationally.

Ecolab expects to improve margins from ongoing restructuring initiatives and synergies from the ongoing Nalco integration process. Further, the company remains committed toward delivery of incremental returns to investors leveraging a solid balance sheet, healthy cash flow and earnings stability.

Ecolab is active on the acquisition front and continues to explore opportunities to expand into high-growth markets. The decision to acquire Champion within a year of the Nalco acquisition strengthens the company’s energy business in North America. Following the closure, the company is slated to become a giant in the oilfield chemical business.

Even though the company has completed multiple acquisitions over the past few years, back-to-back acquisitions pose substantial integration risks. Difficult economic trends, currency fluctuations along with higher raw material prices and delivered product costs remain additional headwinds.

In addition, Ecolab operates in highly competitive markets and hence we remain cautious about the aggressive competition from players like The Clorox Company (CLX - Analyst Report) and Church & Dwight Co. Inc. (CHD - Snapshot Report).

Ecolab currently has a short-term Zacks #3 Rank (Hold rating).

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