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3 Reasons to Retain Ecolab (ECL) Stock in Your Portfolio

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Ecolab Inc. (ECL - Free Report) is well-poised for growth in the coming quarters, courtesy of its solid product portfolio. A robust second-quarter 2022 performance, along with its strong business, is expected to contribute further. Compliance risks and cost fluctuations persist.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 33.1% compared with 25.5% decline of the industry and 19.9% fall of the S&P 500 composite.

The renowned water, hygiene and infection prevention solutions and services provider has a market capitalization of $41.24 billion. It projects 12.7% growth for the next five years and expects to maintain a strong performance. Ecolab’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and matched the same in the other, the average earnings surprise being 2.4%.

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Let’s delve deeper.

Product Portfolio Solid: We are upbeat about Ecolab’s solid product portfolio, which has enabled it to fortify its foothold in a niche space globally. Ecolab delivers comprehensive solutions, data-driven insights and personalized service to advance food safety and maintain clean and safe environments.

The company also provides products and services that optimize water and energy use, and improve operational efficiencies and sustainability for customers in the food, healthcare, hospitality and industrial markets in more than 170 countries around the world.

Strong Business: Ecolab’s consistent delivery of considerable earnings growth despite the current challenging business environment continues to impress. Ecolab witnessed a strong second-quarter 2022 performance, driven by accelerating total pricing and good volume leverage.

The second quarter top line was driven by 9% total pricing, which nearly doubled from the first quarter, and good organic volume growth led by robust performances by Ecolab’s Institutional & Specialty segment. New business wins also significantly contributed to the overall quarterly revenues.

Strong Q2 Results: Ecolab’s solid second-quarter results buoy our optimism. The company registered a robust year-over-year uptick in its top line, along with solid performances across all segments. Strong volume and pricing momentum were also seen. Ecolab’s new business wins and innovation pipelines are well-positioned to drive growth and global leadership. The company’s digital capabilities are also continuing to broaden, develop and add competitive advantages.


Compliance Risks: Ecolab’s business is subjected to various laws and regulations relating to the environment, including evolving climate change standards and the conduct of its business. Compliance with these laws and regulations exposes the company to potential financial liability and increases its operating costs.

The regulation of Ecolab’s products and operations continues to increase with more stringent standards, causing increased costs of operations and the potential for liability if a violation occurs.

Cost Fluctuations: The prices of raw materials used in Ecolab’s business can fluctuate from time to time. In recent years, the company has experienced periods of increased raw material costs. Changes in raw material prices, unavailability of adequate and reasonably priced raw materials or substitutes for the same, or the inability to obtain or renew supply agreements on favorable terms can materially and adversely affect Ecolab’s consolidated operations.

Estimate Trend

Ecolab is witnessing a negative estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 4.9% south to $4.77.

The Zacks Consensus Estimate for the company’s third-quarter 2022 revenues is pegged at $3.69 billion, suggesting a 10.9% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - Free Report) .

AMN Healthcare, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.7%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has gained 17% against the industry’s 57.5% decline in the past year.

ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.5% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.

ShockWave Medical has gained 35.4% against the industry’s 48% decline over the past year.

McKesson, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 13%.

McKesson has gained 76.5% against the industry’s 39.1% decline over the past year.

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