Back to top

Image: Bigstock

Ecolab (ECL) to Report Q2 Earnings: What's in the Offing?

Read MoreHide Full Article

Ecolab, Inc. (ECL - Free Report) is scheduled to report second-quarter 2022 results on Jul 26, before the opening bell.

In the last-reported quarter, the company’s earnings of 82 cents per share matched the Zacks Consensus Estimate. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on three occasions and broke even the same in one, delivering an earnings surprise of 2.8%, on average.                   

Let’s see how things have shaped up for Ecolab prior to this announcement:

Global Industrial

The Global Industrial segment witnessed a sales uptick in the first quarter of 2022 on the back of substantial product sales growth. Water, Food & Beverage, Paper and Downstream had recorded solid growth in the last-reported quarter, led by new business wins and accelerated pricing. Per the company’s last-reported quarter’s earnings call, animal health and new business areas created by it, like the chemical industry, have been performing quite well over the past few months. This momentum is likely to have continued in the second quarter as well.

Per the first-quarter quarter earnings call in April, Ecolab had confirmed that its Water business was continuing to register strong momentum. Rising water scarcity issues, need for net zero carbon and water, and rising demand for water, are likely to keep the momentum going. This is expected to have considerably driven the second-quarter 2022 top line.

Ecolab Inc. Price and EPS Surprise

Ecolab Inc. Price and EPS Surprise

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

Notable offerings from the company include the Peroxide Multi Surface Cleaner, Disinfectant for use against SARS-CoV-2, Sink & Surface Cleaner Sanitizer, Exelerate TUFSOIL and the Water Flow Intelligence, which are likely to have registered continued customer adoption in the second quarter, thereby pushing up revenues.

Global Institutional & Specialty

Although Ecolab’s Institutional & Specialty segment recorded strong growth in the last-reported quarter, it witnessed a stalled recovery in restaurant and lodging activity due to extended pandemic-induced impacts and customer staffing shortages. Specialty sales had shown good growth owing to strong quickservice sales, but were partially offset by lower food retail sales, partly due to customer staffing shortages impacting cleaning intensity.

The company, during its first-quarter earnings call, had stated that the restaurants and hotels had been witnessing a slowdown from a market perspective compared with what Ecolab was expecting. The slowdown, which was initially due to Omicron, is currently due to interest rate and price of oil, among other factors. Ecolab’s China business is also likely to be lower due to strict lockdown measures. These factors are likely to weigh on the company’s revenues in the to-be-reported quarter.

However, Ecolab's programs (including Ecolab Science Certified and Net Zero) are expected to provide its Industrial segment’s customers with improved ways to deliver on their commitments. In its first-quarter earnings call, the company had confirmed that it was experiencing significant progress via Net Zero. These trends are likely to have continued in the to-be-reported quarter as well, thus driving up revenues.

Other Factors at Work

Rising demand for Pest Elimination (a component of Ecolab’s broader Other segment) in food and beverage plants to avoid food safety issues is likely to have driven the segment’s revenues in the to-be-reported quarter. However, higher energy surcharge due to increasing oil prices is likely to weigh on the second-quarter segmental revenues.

The Global Healthcare and Life Sciences segment is likely to have witnessed sustained underlying sales growth in the second quarter, attributable to demands from the surgical units. This momentum, along with accelerating pricing and structured productivity resulting from Ecolab’s digital automation, is also likely to have contributed robustly to this business’ revenues.

The Estimate Picture

For second-quarter 2022, the Zacks Consensus Estimate of $3.51 billion for total revenues implies an improvement of 10.9% from the prior-year quarter’s reported figure.

The consensus estimate for earnings per share is pegged at $1.09, implying a decline of 10.7% from the prior-year period’s reported number.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has higher chances of beating estimates. However, this is not the case here as you can see:

Earnings ESP: Ecolab has an Earnings ESP of +2.24%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle:

Alkermes plc (ALKS - Free Report) has an Earnings ESP of +300% and a Zacks Rank of 1. ALKS has an estimated long-term growth rate of 25.1%.

Alkermes’ earnings surpassed estimates in all the trailing four quarters, with the average surprise being 350.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

STERIS plc (STE - Free Report) has an Earnings ESP of +1.85% and is a Zacks #1 Ranked stock. STE has an earnings yield of 4.1% against the industry’s negative yield.

STERIS’ earnings surpassed estimates in all the trailing four quarters, with the average surprise being 9.2%.

HealthEquity, Inc. (HQY - Free Report) has an Earnings ESP of +7.24% and a Zacks Rank of 2 at present. HQY has an estimated long-term growth rate of 20.3%.

HealthEquity’s earnings surpassed estimates in two of the trailing four quarters, with the average surprise being 1.4%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Free Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Ecolab Inc. (ECL) - free report >>

Alkermes plc (ALKS) - free report >>

STERIS plc (STE) - free report >>

HealthEquity, Inc. (HQY) - free report >>