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Three Reasons to Add Ecolab (ECL) Stock to Your Portfolio
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Ecolab Inc. (ECL - Free Report) has been gaining from its focus on research and development (R&D). The optimism led by a solid third-quarter 2023 performance, along with a few acquisitions, is expected to contribute further. However, concerns arising from cost fluctuations and data security threats persist.
Over the past year, this Zacks Rank #2 (Buy) stock has gained 34.9% compared with a 17.8% rise of the industry and 24.9% growth of the S&P 500 composite.
The renowned water, hygiene and infection prevention solutions and services provider has a market capitalization of $56.85 billion. It projects 13.1% growth for the next five years and expects to maintain a strong performance. Ecolab’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 1.9%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Focus on R&D: Ecolab’s R&D program consists principally of developing and validating the performance of new products, processes, techniques and equipment, improving the efficiency of those already existing, improving service program content, evaluating the environmental compatibility of products and technical support. Management believes continued R&D activities are critical to maintaining its leadership position within the industry and will provide it with a competitive advantage as it seeks additional business with new and existing customers.
Acquisitions: Ecolab makes business acquisitions that align with its strategic business objectives, which is promising. In May 2023, the company acquired Chemlink Laboratories LLC, a U.S.-based producer of small-format cleaning solutions. Ecolab also made two other immaterial acquisitions during the second quarter of 2023. All three acquisitions became part of the Global Institutional & Specialty reporting segment.
Strong Q3 Results: Ecolab’s solid third-quarter 2023 results buoy our optimism. 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 accelerating volume trends were also seen. The company’s innovation, digital offerings and service capabilities are expected to lead to robust new business wins, which are encouraging.
Downsides
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 and the unavailability of adequate and reasonably priced raw materials or substitutes for the same can materially and adversely affect Ecolab’s consolidated results of operations.
Data Security Threat: Ecolab relies, to a large extent, upon information technology systems and infrastructure to operate its business. The size and complexity of the company’s information technology systems make them potentially vulnerable to failure, malicious intrusion and random attacks. Acquisitions have resulted in further de-centralization of systems and additional complexity in its systems infrastructure.
Estimate Trend
Ecolab is witnessing a positive estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 1.8% north to $5.18.
The Zacks Consensus Estimate for the company’s fourth-quarter 2023 revenues is pegged at $3.94 billion, suggesting a 7.4% improvement from the year-ago quarter’s reported number.
Other Key Picks
A few other top-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , HealthEquity, Inc. (HQY - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 17.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 38.2% compared with the industry’s 9.4% rise in the past year.
HealthEquity, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 27.5%. HQY’s earnings surpassed estimates in each of the trailing four quarters, with the average being 16.5%.
HealthEquity has gained 8.2% against the industry’s 6.3% decline over the past year.
Integer Holdings, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 11.9%.
Integer Holdings’ shares have rallied 44.9% compared with the industry’s 3.7% rise in the past year.
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Three Reasons to Add Ecolab (ECL) Stock to Your Portfolio
Ecolab Inc. (ECL - Free Report) has been gaining from its focus on research and development (R&D). The optimism led by a solid third-quarter 2023 performance, along with a few acquisitions, is expected to contribute further. However, concerns arising from cost fluctuations and data security threats persist.
Over the past year, this Zacks Rank #2 (Buy) stock has gained 34.9% compared with a 17.8% rise of the industry and 24.9% growth of the S&P 500 composite.
The renowned water, hygiene and infection prevention solutions and services provider has a market capitalization of $56.85 billion. It projects 13.1% growth for the next five years and expects to maintain a strong performance. Ecolab’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 1.9%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Focus on R&D: Ecolab’s R&D program consists principally of developing and validating the performance of new products, processes, techniques and equipment, improving the efficiency of those already existing, improving service program content, evaluating the environmental compatibility of products and technical support. Management believes continued R&D activities are critical to maintaining its leadership position within the industry and will provide it with a competitive advantage as it seeks additional business with new and existing customers.
Acquisitions: Ecolab makes business acquisitions that align with its strategic business objectives, which is promising. In May 2023, the company acquired Chemlink Laboratories LLC, a U.S.-based producer of small-format cleaning solutions. Ecolab also made two other immaterial acquisitions during the second quarter of 2023. All three acquisitions became part of the Global Institutional & Specialty reporting segment.
Strong Q3 Results: Ecolab’s solid third-quarter 2023 results buoy our optimism. 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 accelerating volume trends were also seen. The company’s innovation, digital offerings and service capabilities are expected to lead to robust new business wins, which are encouraging.
Downsides
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 and the unavailability of adequate and reasonably priced raw materials or substitutes for the same can materially and adversely affect Ecolab’s consolidated results of operations.
Data Security Threat: Ecolab relies, to a large extent, upon information technology systems and infrastructure to operate its business. The size and complexity of the company’s information technology systems make them potentially vulnerable to failure, malicious intrusion and random attacks. Acquisitions have resulted in further de-centralization of systems and additional complexity in its systems infrastructure.
Estimate Trend
Ecolab is witnessing a positive estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 1.8% north to $5.18.
The Zacks Consensus Estimate for the company’s fourth-quarter 2023 revenues is pegged at $3.94 billion, suggesting a 7.4% improvement from the year-ago quarter’s reported number.
Other Key Picks
A few other top-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , HealthEquity, Inc. (HQY - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 17.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 38.2% compared with the industry’s 9.4% rise in the past year.
HealthEquity, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 27.5%. HQY’s earnings surpassed estimates in each of the trailing four quarters, with the average being 16.5%.
HealthEquity has gained 8.2% against the industry’s 6.3% decline over the past year.
Integer Holdings, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 11.9%.
Integer Holdings’ shares have rallied 44.9% compared with the industry’s 3.7% rise in the past year.