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Here's Why You Should Retain Ecolab (ECL) Stock For Now

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Ecolab Inc. (ECL - Free Report) continues to benefit from robust product portfolio, strong international presence and continued solid performance at the Global Industrial segment. However, forex remains a concern.

The stock carries a Zacks Rank #3 (Hold).

Price Performance

Shares of Ecolab have gained 32.2% year to date, outperforming the industry’s growth of 16.8%. Meanwhile, the S&P 500 Index rallied 17.3% in the same timeframe.



What’s Deterring the Stock?

Given Ecolab’s strong international presence and volatility in foreign currency exchange rates continue to plague the stock’s overall performance. We believe that volatile foreign currency exchange rates will remain a significant headwind in 2019 and beyond.

In fact, management at Ecolab expects foreign currency translation to have an unfavorable impact of 11 cents on 2019 EPS. Additionally, third-quarter EPS is likely to be impacted by 2 cents.

What’s Favoring the Stock?

Ecolab continues to gain from robust product portfolio, thereby boosting overall results. The company has major launches underway including the new Smartpowerware wash platform, which is expected to drive institutional improvements. Moreover, the company continues to invest significantly in customer-oriented and infrastructure technology.

Further, Ecolab has been gaining traction in digital technology markets. Per management, new additions in the company’s portfolio will help it to reach its mid-teens EPS growth goal in 2019 and beyond.

The company has significant presence in the international market, with international operations in Europe, Asia-Pacific, Latin America and Canada. We anticipate this momentum to continue in the future on the back of solid performance from emerging markets.

Global Industrial segment continues to drive its growth. In fact, in the second quarter of 2019, sales at this segment improved 4% year over year to almost $1.38 billion in the second quarter. The upside was driven by major gains in Water and Life Sciences units. Geographically, all regions showed impressive sales growth in the last reported quarter.

Which Way are Estimates Headed?

For 2019, the Zacks Consensus Estimate for revenues is pegged at $15.21 billion, indicating an improvement of 3.7% from the year-ago quarter. The same for earnings per share stands at $5.91, suggesting growth of 12.6% from the year-ago reported figure.

Key Picks

Some better-ranked stocks from the broader medical space are Nissan Chemical Corporation (NNCHY - Free Report) , Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) and McKesson Corporation (MCK - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank  (Strong Buy) stocks here.

Nissan Chemical has a long-term earnings growth rate of 10%.

Fresenius Medical has a long-term earnings growth rate of 5.9%.

McKesson has a long-term earnings growth rate of 6.9%.

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