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Ecolab (ECL) Q1 Earnings Miss, Revenues Surpass Estimates

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Ecolab Inc. (ECL - Free Report) reported first-quarter 2021 adjusted earnings per share (EPS) of 81 cents, which missed the Zacks Consensus Estimate of 82 cents by 1.2%. Also, the bottom line fell 18.2% on a year-over-year basis.

The year-over-year decline in the bottom line was due to COVID-associated volume declines, unfavorable business mix and Texas freeze impacts, which more than offset favorable pricing and cost-saving initiatives.

Revenue Details

This Zacks Rank #4 (Sell) company’s quarterly net sales were $2.89 billion, down 4.5% from the year-ago figure. Nonetheless, the top line beat the Zacks Consensus Estimate by 0.9%.

Segmental Analysis

Global Industrial

Sales at the segment fell 2.1% year over year to $1.43 billion. Substantial decrease in Downstream sales and a decline in Food & Beverage more than offset modest sales growth in Paper and sustained Water sales.

Global Institutional & Specialty

Sales declined 21% year over year to $858.5 million owing to a slight decline in the Institutional business as well as in Specialty sales resulting from the adverse impact of the continued COVID-19 second wave.

Ecolab Inc. Price, Consensus and EPS Surprise

Ecolab Inc. Price, Consensus and EPS Surprise

Ecolab Inc. price-consensus-eps-surprise-chart | Ecolab Inc. Quote

Global Healthcare and Life Sciences

Sales at the segment improved 14.4% year over year to $293.7 million, driven by new business and higher sales on account of the coronavirus-related demand in both the Healthcare and Life Sciences business lines.

Other

Sales declined 2.9% year over year to $271.3 million.

Margin Analysis

Ecolab reported adjusted gross profit of $1.19 billion, down 13% year over year. As a percentage of revenues, adjusted gross margin in the first quarter was 41.3%, down 210 basis points (bps).

Adjusted operating income in the quarter was $330.2 million, down 19.3% year over year. Adjusted operating margin in the quarter was 11.4%, which contracted 180 bps year over year.

Guidance

The company has not issued either quarterly or 2021 outlook due to the continued uncertainty surrounding the COVID-19 pandemic and the full scope of its impact on the global economy and duration of the same.

The company estimates continued recovery in 2021. Full-year 2021 sales at the Healthcare & Life Sciences segment are anticipated to exhibit moderate improvement compared with the previous year’s solid growth. Both Industrial and Other segment business are expected to deliver sales growth on a year-over-year basis. Institutional & Specialty segment sales are projected to show substantial growth on a year-over-year basis in 2021 as it progresses toward its pre-COVID peak 2019 levels.

For the second quarter, the company expects to witness growth, primarily driven by robust year-over-year growth in its Institutional division. New business along with improving trends in early-reopening of U.S. states and sustained U.S. vaccination progress are likely to contribute to the anticipated growth. However, a softer Europe and emerging market recovery can partially offset the improvement.

The company estimates strong consolidated gains in the second half of 2021, with substantial growth for the full year 2021 on a year-over-year basis.

Wrapping Up

Ecolab exited the first quarter on a mixed note. The company witnessed weak performance across Global Industrial and Global Institutional business segments in the quarter under review. Contraction in both gross and operating margins raises concern.

Nonetheless, the company displayed substantial sequential improvement despite the COVID-19 impact on its business segments. Moreover, Ecolab’s Global Healthcare and Life Sciences segment exhibited solid performance.

Key Picks

Some better-ranked stocks, which are expected to report earnings soon, are DENTSPLY SIRONA Inc. (XRAY - Free Report) , LeMaitre Vascular, Inc. (LMAT - Free Report) and Omnicell, Inc. (OMCL - Free Report) , each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

DENTSPLY SIRONA is set to release results on May 6. The Zacks Consensus Estimate for DENTSPLY SIRONA’s first-quarter 2021 adjusted EPS is pegged at 55 cents, suggesting growth of 27.9% from the year-ago quarter. The consensus mark for first-quarter revenues stands at $923.3 million, indicating a year-over-year increase of 6.3%.

The Zacks Consensus Estimate for LeMaitre’s first-quarter 2021 revenues is pegged at $35.6 million, suggesting year-over-year improvement of 16.4%. The same for EPS stands at 28 cents, indicating growth of 75% from the year-ago reported figure.

The Zacks Consensus Estimate for Omnicell’s first-quarter 2021 EPS is currently pegged at 67 cents, indicating growth of 1.5% from the year-ago reported figure. The same for revenues stands at $245.4 million, indicating growth of 6.8% from the year-ago reported figure.

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