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Can Ecolab (ECL) Surprise This Earnings Season?

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Ecolab Inc. (ECL - Free Report) is set to report its first-quarter 2014 results after the market closes on April 28. Last quarter, the company posted a negative surprise of 0.95%. However, Ecolab has delivered positive surprises in 3 of its last 4 quarters, with an average beat of 1.96%.  Let's see how things are shaping up for this announcement.

Factors at Play

Ecolab's earnings rose 17% year over year to $1.04 per share in the fourth quarter of 2013, driven by solid sales growth, volume and pricing gains, new products, cost efficiency programs, synergies and the Champion acquisition. However, earnings per share missed the Zacks Consensus Estimate by a penny.

In the last reported quarter, Ecolab delivered solid top-line growth, reflected by a 16.9% year-over-year increase in net sales amounting to $3559.5 million. The company's acquisition adjusted fixed currency sales growth was 6% in the fourth quarter, driven by sales gain in Global Specialty, Global Food and Beverage, Global Energy, Global Water and the Latin American and Asia Pacific regions.

On a regional basis, while Ecolab reported solid sales growth in Latin America, sales growth was moderately lower in Europe. Business mix impact of higher sales from Ecolab's Energy segment outweighed the positive effects of volume and mix gains as wells as merger synergies and cost efficiencies, as  the Energy business has lower gross margin compared with other businesses.

Ecolab's management seemed impressed with the company's fourth-quarter results. For the 2014-first-quarter, Ecolab expects adjusted earnings per share in the range of 71 to 75 cents, representing an 18 to 25% increase compared to the prior-year's adjusted earnings per share of 60 cents.

Earnings Whispers?

Our proven model does not conclusively show that Ecolab is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  Expected Surprise Prediction or ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Ecolab has a Zacks ESP of 0.00%.

Zacks Rank: Ecolab's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

North American Palladium Ltd. (ALGN - Free Report) , earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy).

Kraton Performance Polymers Inc. (KRA - Free Report) , earnings ESP of +15.79% and a Zacks Rank #1 (Strong Buy).

Cabot Corp. (CBT - Free Report) , earnings ESP of +1.19% and a Zacks Rank #2 (Buy).

Read the Full Research Report on ECL
Read the Full Research Report on ALGN
Read the Full Research Report on CBT
Read the Full Research Report on KRA

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