A month has gone by since the last earnings report for Ecolab (ECL Quick QuoteECL - Free Report) . Shares have added about 12.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ecolab due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Ecolab Q3 Earnings Surpass Estimates, Margins Rise

Ecolab reported third-quarter 2023 adjusted earnings per share of $1.54, up 18.5% year over year. The bottom line exceeded the Zacks Consensus Estimate by 1.3%.

GAAP earnings per share for the quarter was $1.41, up 16.5% year over year.

Revenue Details

Revenues grossed $3.96 billion in the reported quarter, up 7.9% year over year. The metric missed the Zacks Consensus Estimate by 0.7%.

Ecolab’s organic sales increased 7% from the prior-year period’s level.

The year-over-year uptick in the third-quarter organic sales was driven by double-digit growth in the Institutional & Specialty segment and Pest Elimination division, solid growth in the Industrial segment and improved growth in the Healthcare & Life Sciences segment.

Segmental Analysis

The Global Industrial segment’s fixed currency sales of $1.83 billion reflect 3.6% reported growth year over year. Organic sales increased 4% year over year, driven by robust growth in Food & Beverage and Water. This more than offset the expected short-term decline in Paper sales, which continued to be impacted by soft industry demand.

The Global Institutional & Specialty arm’s fixed currency sales of $1.31 billion reflect reported growth of 12.3%. Organic sales increased 11% year over year, with both the Institutional and Specialty divisions growing double digits, reflecting additional pricing and new business gains.

The Global Healthcare and Life Sciences arm’s fixed currency sales of $400.7 million improved 11.3%. Organic sales growth of 11% reflected continued growth in Healthcare and improved Life Sciences sales growth. Healthcare’s improved underlying growth was driven by good pricing and new business gains, and the business also benefited from larger-than-normal surgical sales.

The Other segment’s fixed currency sales of $380.3 million improved 8.4% on a reported basis. Organic sales growth was 8%, driven by double-digit growth in Pest Elimination.

Margin Analysis

In the quarter under review, Ecolab’s gross profit improved 18.1% to $1.63 billion. The gross margin expanded 357 basis points (bps) to 41.1%.

Selling, general and administrative expenses rose 16.9% to $1.02 billion year over year.

Adjusted operating profit totaled $602.7 million, increasing 20.3% from the prior-year quarter’s level. Adjusted operating margin in the quarter also expanded 158 bps to 15.2%.

Financial Position

Ecolab exited third-quarter 2023 with cash and cash equivalents of $1 billion compared with $554.2 million at the end of the second quarter. Total debt at the end of third-quarter 2023 was $8.616 billion compared with $8.621 billion at the second-quarter end.

Cumulative net cash provided by operating activities at the end of third-quarter 2023 was $1.56 billion compared with $929.2 million a year ago.

Meanwhile, Ecolab has a consistent dividend-paying history, with a five-year annualized dividend growth of 3.58%.

Guidance

Ecolab has provided its adjusted earnings per share outlook for the fourth quarter of 2023.

The company expects its adjusted earnings per share to be in the range of $1.48-$1.58, up 17-24% from the year-ago period. The Zacks Consensus Estimate for the quarter is currently pegged at $1.52 per share.

For 2024, Ecolab continues to expect mid-teens or better growth in adjusted earnings per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 5.53% due to these changes.

VGM Scores

At this time, Ecolab has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Ecolab has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Ecolab belongs to the Zacks Chemical - Specialty industry. Another stock from the same industry, PPG Industries (PPG Quick QuotePPG - Free Report) , has gained 13.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

PPG Industries reported revenues of $4.64 billion in the last reported quarter, representing a year-over-year change of +3.9%. EPS of $2.07 for the same period compares with $1.66 a year ago.

PPG Industries is expected to post earnings of $1.49 per share for the current quarter, representing a year-over-year change of +22.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.3%.

PPG Industries has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.