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Ecolab Inc. (ECL - Free Report) reported second-quarter 2023 adjusted earnings per share (EPS) of $1.24, up 12.7% year over year. The bottom line exceeded the Zacks Consensus Estimate by 2.5%.
GAAP EPS for the quarter was $1.15, up 6.5% year over year.
Revenue Details
Revenues grossed $3.85 billion in the reported quarter, up 7.6% year over year. The metric missed the Zacks Consensus Estimate by 0.4%.
Ecolab’s organic sales increased 9% from the prior-year period’s level.
The year-over-year uptick in the second-quarter organic sales was driven by strong growth in the Institutional & Specialty, Industrial and Other segments.
Segmental Analysis
The Global Industrial segment’s fixed currency sales of $1.79 billion reflect 8.6% reported growth year over year. Organic sales increased 9% year over year, driven by double-digit gains in Water and Food & Beverage. This compares to our projection of second-quarter segmental revenues of $1.86 billion.
The Global Institutional & Specialty arm’s fixed currency sales of $1.27 billion reflect reported growth of 13.5%. Organic sales increased 13% year over year, driven by double-digit growth in both the Institutional and Specialty divisions. This compares to our projection of second-quarter segmental revenues of $1.21 billion.
The Global Healthcare and Life Sciences arm’s fixed currency sales of $387.5 million improved 0.8%. Organic sales growth of 1% was driven by growth in Healthcare sales, offset by soft near-term life sciences industry demand. This compares to our projection of second-quarter segmental revenues of $416.2 million.
The Other segment’s fixed currency sales of $362.6 million improved 9.1% on a reported basis. Organic sales growth was 9%, reflecting double-digit growth in Pest Elimination. This compares to our projection of second-quarter segmental revenues of $364.3 million.
In the quarter under review, Ecolab’s gross profit improved 10.8% to $1.52 billion. The gross margin expanded 114 basis points (bps) to 39.4%.
We had projected 39.4% of gross margin for the second quarter, in line with the company’s reported figure.
Selling, general and administrative expenses rose 7.6% to $1.01 billion year over year.
Adjusted operating profit totaled $505.7 million, increasing 17.8% from the prior-year quarter’s level. Adjusted operating margin in the quarter also expanded 114 bps to 13.1%.
Financial Position
Ecolab exited second-quarter 2023 with cash and cash equivalents of $554.2 million compared with $419.4 million at the end of first quarter. Total debt at the end of second-quarter 2023 was $8.62 billion compared with $8.64 billion at the first-quarter end.
Cumulative net cash provided by operating activities at the end of second-quarter 2023 was $771.6 million compared with $492.5 million a year ago.
Meanwhile, Ecolab has a consistent dividend-paying history, with five-year annualized dividend growth being 4.1%.
Guidance
Ecolab has not provided its 2023 outlook. However, it expects its strong performance to overcome the volatile macro environment to deliver mid-teens growth in adjusted diluted EPS in the second half of 2023.
Ecolab has provided its adjusted EPS outlook for the third quarter of 2023. The company expects its adjusted EPS to be in the range of $1.45-$1.55, up 12-19% from the prior-year period. The Zacks Consensus Estimate for the quarter is currently pegged at $1.45 per share.
Our Take
Ecolab exited the second quarter of 2023 with better-than-expected earnings. The company registered a robust year-over-year uptick in its top and bottom lines, along with solid performances across all segments. Strong pricing momentum and steady overall volume were also encouraging. Ecolab’s new business wins and productivity initiatives are well-positioned to drive growth and global leadership. The company’s digital capabilities, innovation and global service expertise are expected to lead to robust new business wins, which are encouraging. The expansion of both margins bodes well for the stock.
However, Ecolab’s lower-than-expected revenues and soft near-term life sciences industry demand were disappointing. The company faced easing but ongoing delivered product cost inflation and challenging macroeconomic conditions, raising our apprehension.
Zacks Rank and Other Key Picks
Ecolab currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
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Ecolab (ECL) Q2 Earnings Surpass Estimates, Margins Rise
Ecolab Inc. (ECL - Free Report) reported second-quarter 2023 adjusted earnings per share (EPS) of $1.24, up 12.7% year over year. The bottom line exceeded the Zacks Consensus Estimate by 2.5%.
GAAP EPS for the quarter was $1.15, up 6.5% year over year.
Revenue Details
Revenues grossed $3.85 billion in the reported quarter, up 7.6% year over year. The metric missed the Zacks Consensus Estimate by 0.4%.
Ecolab’s organic sales increased 9% from the prior-year period’s level.
The year-over-year uptick in the second-quarter organic sales was driven by strong growth in the Institutional & Specialty, Industrial and Other segments.
Segmental Analysis
The Global Industrial segment’s fixed currency sales of $1.79 billion reflect 8.6% reported growth year over year. Organic sales increased 9% year over year, driven by double-digit gains in Water and Food & Beverage. This compares to our projection of second-quarter segmental revenues of $1.86 billion.
The Global Institutional & Specialty arm’s fixed currency sales of $1.27 billion reflect reported growth of 13.5%. Organic sales increased 13% year over year, driven by double-digit growth in both the Institutional and Specialty divisions. This compares to our projection of second-quarter segmental revenues of $1.21 billion.
The Global Healthcare and Life Sciences arm’s fixed currency sales of $387.5 million improved 0.8%. Organic sales growth of 1% was driven by growth in Healthcare sales, offset by soft near-term life sciences industry demand. This compares to our projection of second-quarter segmental revenues of $416.2 million.
The Other segment’s fixed currency sales of $362.6 million improved 9.1% on a reported basis. Organic sales growth was 9%, reflecting double-digit growth in Pest Elimination. This compares to our projection of second-quarter segmental revenues of $364.3 million.
Ecolab Inc. Price, Consensus and EPS Surprise
Ecolab Inc. price-consensus-eps-surprise-chart | Ecolab Inc. Quote
Margin Analysis
In the quarter under review, Ecolab’s gross profit improved 10.8% to $1.52 billion. The gross margin expanded 114 basis points (bps) to 39.4%.
We had projected 39.4% of gross margin for the second quarter, in line with the company’s reported figure.
Selling, general and administrative expenses rose 7.6% to $1.01 billion year over year.
Adjusted operating profit totaled $505.7 million, increasing 17.8% from the prior-year quarter’s level. Adjusted operating margin in the quarter also expanded 114 bps to 13.1%.
Financial Position
Ecolab exited second-quarter 2023 with cash and cash equivalents of $554.2 million compared with $419.4 million at the end of first quarter. Total debt at the end of second-quarter 2023 was $8.62 billion compared with $8.64 billion at the first-quarter end.
Cumulative net cash provided by operating activities at the end of second-quarter 2023 was $771.6 million compared with $492.5 million a year ago.
Meanwhile, Ecolab has a consistent dividend-paying history, with five-year annualized dividend growth being 4.1%.
Guidance
Ecolab has not provided its 2023 outlook. However, it expects its strong performance to overcome the volatile macro environment to deliver mid-teens growth in adjusted diluted EPS in the second half of 2023.
Ecolab has provided its adjusted EPS outlook for the third quarter of 2023. The company expects its adjusted EPS to be in the range of $1.45-$1.55, up 12-19% from the prior-year period. The Zacks Consensus Estimate for the quarter is currently pegged at $1.45 per share.
Our Take
Ecolab exited the second quarter of 2023 with better-than-expected earnings. The company registered a robust year-over-year uptick in its top and bottom lines, along with solid performances across all segments. Strong pricing momentum and steady overall volume were also encouraging. Ecolab’s new business wins and productivity initiatives are well-positioned to drive growth and global leadership. The company’s digital capabilities, innovation and global service expertise are expected to lead to robust new business wins, which are encouraging. The expansion of both margins bodes well for the stock.
However, Ecolab’s lower-than-expected revenues and soft near-term life sciences industry demand were disappointing. The company faced easing but ongoing delivered product cost inflation and challenging macroeconomic conditions, raising our apprehension.
Zacks Rank and Other Key Picks
Ecolab currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.