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Ecolab's (ECL) Q2 Earnings in Line, FY16 View Lowered
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Ecolab Inc. (ECL - Free Report) reported adjusted earnings (excluding special gains, charges and tax items) of $1.08 per share in the second quarter of 2016 which was in line with the Zacks Consensus Estimate and remained flat on a year-over-year basis.
Unfavorable foreign exchange impacted earnings by 8 cents, which were entirely mitigated by lower product costs, cost savings, lower taxes and share count in the quarter.
Quarter Details
Adjusted sales on a fixed currency basis inched up 1% year over year to $3.25 billion in the quarter but missed the Zacks Consensus Estimate of $3.30 billion.
Global Industrial segment sales grew 4% year over year to almost $1.15 billion at fixed currency. Acquisition adjusted fixed currency sales rose 2%, driven by strong growth in Food & Beverage with modest growth in Water and Paper. Regionally, Latin America reported strong sales growth, with modest gains recorded in Europe and North America.
Global Institutional segment sales increased 8% to $1.14 billion, led by strong growth in the institutional and Specialty businesses. Acquisition adjusted fixed currency sales grew 5% owing to strong growth from the Specialty and Institutional business. Sales were good in North America, Asia Pacific, Latin America and Europe.
Global Energy segment sales declined 13% to $754.6 million in the reported quarter. Sales growth in the downstream business was more than offset by a significant decline in the upstream business.
Sales from the Other segment climbed 8% year over year to $203.4 million, on account of strong growth in both Pest Elimination and Equipment Care businesses.
Operating income (excluding special gains and charges) at fixed currency increased 1% from the year-ago quarter to $402.9 million. Operating profits at the Global Industrial, Global Institutional and Other segments improved 16%, 7% and 22%, respectively. Meanwhile, Global Energy segment’s operating profit plunged 29% on a year-over-year basis.
Acquisition adjusted fixed currency operating income in the Global Industrial segment increased 13% on the back of appropriate pricing, cost savings initiatives, lower delivered product costs and sales volume gains.
Acquisition adjusted fixed currency operating income in the Global Institutional segment increased 8% primarily due to positive pricing and sales volume gains.
Acquisition adjusted fixed currency operating income in the Global Energy segment decreased 32% due to lower sales volumes, reduced plant overhead absorption and lowered pricing.
Fixed currency Other segment operating income surged 22% due to pricing and sales volume gains.
Outlook
For third quarter of 2016, Ecolab projects adjusted gross margin in the range of 48% to 49%. Selling, general & administrative (SG&A) expenses, as a percentage of sales, are expected to be approximately 32%. Interest expenses are projected at around $66 million.
Adjusted earnings are estimated between $1.24 and $1.32 per share. Unfavorable foreign currency and the impact of Venezuelan deconsolidation are anticipated to affect earnings by 8 cents.
For 2016, Ecolab expects adjusted gross margin to be approximately 48%. SG&A expenses, as a percentage of sales, are projected in the range of 32% to 33%. Meanwhile, interest expense is forecasted at around $270 million.
Ecolab revised down the top-end of its adjusted earnings guidance range to $4.35-- $4.50 per share (previous guidance range was $4.35 to $4.55). Unfavorable foreign currency and the impact of Venezuelan deconsolidation are expected to hurt earnings in the range of 27-32 cents.
Ecolab expects mid-single digit acquisition adjusted fixed currency sales growth at the Institutional, Industrial and Other segments. Energy segment sales are expected to decline approximately 10%. The company expects to repurchase approximately $700 million worth of its shares in 2016.
Zacks Rank & Stocks to Consider
Currently, Ecolab carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the industry are American Vanguard Corp. (AVD - Free Report) , Ferro Corp. and Chemtura Corp. . While American Vanguard sports a Zacks Rank #1 (Strong Buy), both Ferro and Chemutra has a Zacks Rank #2 (Buy).
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Ecolab's (ECL) Q2 Earnings in Line, FY16 View Lowered
Ecolab Inc. (ECL - Free Report) reported adjusted earnings (excluding special gains, charges and tax items) of $1.08 per share in the second quarter of 2016 which was in line with the Zacks Consensus Estimate and remained flat on a year-over-year basis.
Unfavorable foreign exchange impacted earnings by 8 cents, which were entirely mitigated by lower product costs, cost savings, lower taxes and share count in the quarter.
Quarter Details
Adjusted sales on a fixed currency basis inched up 1% year over year to $3.25 billion in the quarter but missed the Zacks Consensus Estimate of $3.30 billion.
Global Industrial segment sales grew 4% year over year to almost $1.15 billion at fixed currency. Acquisition adjusted fixed currency sales rose 2%, driven by strong growth in Food & Beverage with modest growth in Water and Paper. Regionally, Latin America reported strong sales growth, with modest gains recorded in Europe and North America.
Global Institutional segment sales increased 8% to $1.14 billion, led by strong growth in the institutional and Specialty businesses. Acquisition adjusted fixed currency sales grew 5% owing to strong growth from the Specialty and Institutional business. Sales were good in North America, Asia Pacific, Latin America and Europe.
Global Energy segment sales declined 13% to $754.6 million in the reported quarter. Sales growth in the downstream business was more than offset by a significant decline in the upstream business.
Sales from the Other segment climbed 8% year over year to $203.4 million, on account of strong growth in both Pest Elimination and Equipment Care businesses.
ECOLAB INC Price, Consensus and EPS Surprise
ECOLAB INC Price, Consensus and EPS Surprise | ECOLAB INC Quote
Operating income (excluding special gains and charges) at fixed currency increased 1% from the year-ago quarter to $402.9 million. Operating profits at the Global Industrial, Global Institutional and Other segments improved 16%, 7% and 22%, respectively. Meanwhile, Global Energy segment’s operating profit plunged 29% on a year-over-year basis.
Acquisition adjusted fixed currency operating income in the Global Industrial segment increased 13% on the back of appropriate pricing, cost savings initiatives, lower delivered product costs and sales volume gains.
Acquisition adjusted fixed currency operating income in the Global Institutional segment increased 8% primarily due to positive pricing and sales volume gains.
Acquisition adjusted fixed currency operating income in the Global Energy segment decreased 32% due to lower sales volumes, reduced plant overhead absorption and lowered pricing.
Fixed currency Other segment operating income surged 22% due to pricing and sales volume gains.
Outlook
For third quarter of 2016, Ecolab projects adjusted gross margin in the range of 48% to 49%. Selling, general & administrative (SG&A) expenses, as a percentage of sales, are expected to be approximately 32%. Interest expenses are projected at around $66 million.
Adjusted earnings are estimated between $1.24 and $1.32 per share. Unfavorable foreign currency and the impact of Venezuelan deconsolidation are anticipated to affect earnings by 8 cents.
For 2016, Ecolab expects adjusted gross margin to be approximately 48%. SG&A expenses, as a percentage of sales, are projected in the range of 32% to 33%. Meanwhile, interest expense is forecasted at around $270 million.
Ecolab revised down the top-end of its adjusted earnings guidance range to $4.35-- $4.50 per share (previous guidance range was $4.35 to $4.55). Unfavorable foreign currency and the impact of Venezuelan deconsolidation are expected to hurt earnings in the range of 27-32 cents.
Ecolab expects mid-single digit acquisition adjusted fixed currency sales growth at the Institutional, Industrial and Other segments. Energy segment sales are expected to decline approximately 10%. The company expects to repurchase approximately $700 million worth of its shares in 2016.
Zacks Rank & Stocks to Consider
Currently, Ecolab carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the industry are American Vanguard Corp. (AVD - Free Report) , Ferro Corp. and Chemtura Corp. . While American Vanguard sports a Zacks Rank #1 (Strong Buy), both Ferro and Chemutra has a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>