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Here's Why You Should Hold on to Ecolab (ECL) Stock for Now
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Ecolab Inc. (ECL - Free Report) is likely to gain from strong third-quarter 2019 results and a solid guidance for the fourth quarter. However, a dull guidance for 2019 and foreign exchange headwinds raise concern.
In a year’s time, shares of Ecolab have rallied 21.9% compared with the industry’s 13.8% rise. Meanwhile, the S&P 500 Index has risen 21.2%.
With a market capitalization of $53.73 billion, Ecolab is a leading provider of water, hygiene and energy technologies and services that protect people and vital resources. The company’s earnings are anticipated to grow 12.4% over the next five years. For the trailing four quarters, the company has a positive earnings surprise of 0.3%, on average.
Let’s take a closer look at the factors that substantiate Ecolab’s Zacks Rank #3 (Hold).
Factors Working in Favor
In the recently reported third quarter of 2019, Ecolab reported adjusted earnings per share (EPS) of $1.71, up 11.8% on a year-over-year basis.
Revenues amounted to $3.82 billion, up 1.9% from the year-ago quarter number.
Notably, core segments — Global Industrial, Global Institutional and Other — made strong contributions to the top line.
While revenues at Global Industrial grew 5.2%, the same at Global Institutional rose 4% year over year.
Per management, growth in Water, Food & Beverage and Life Sciences units and Ecolab’s Specialty business drove the upside. The Other unit grew 6.8% year over year on strong gains in both Pest Elimination and Colloidal Technologies.
Reflective of this, the company expects fourth-quarter adjusted EPS within $1.64-$1.74, suggesting year-over-year growth of 6-13%. Adjusted gross margin is expected to be 42% of quarterly sales for the fourth quarter as well as 2019.
Factors Deterring the Stock
In the third quarter, Ecolab’s Global Energy sales dropped 2.7% year over year owing to lower upstream sales.
Hence, for 2019, Ecolab expects adjusted EPS within $5.80-$5.90, calling for 10-12% growth over 2018. The projected band is lower than the previously-communicated range of $5.80-$6.00.
Also, foreign currency translation is expected to have a 13-cent unfavorable impact on adjusted EPS.
For 2019, the Zacks Consensus Estimate for revenues is pegged at $15 billion, indicating an improvement of 2.3% from the year-ago reported figure. For adjusted earnings, the same stands at $5.86 per share, suggesting growth of 11.6% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are CONMED Corporation (CNMD - Free Report) , HealthEquity (HQY - Free Report) and West Pharmaceutical Services (WST - Free Report) . While CONMED and West Pharmaceutical each currently carrying a Zacks Rank #2 (Buy), HealthEquity sports a Zacks Rank #1 (Strong Buy).. You can see the complete list of today’s Zacks #1 Rank stocks here.
Conmed has a long-term earnings growth rate of 17%.
HealthEquity has a long-term earnings growth rate of 25%.
West Pharmaceuticals has a long-term earnings growth rate of 14%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Here's Why You Should Hold on to Ecolab (ECL) Stock for Now
Ecolab Inc. (ECL - Free Report) is likely to gain from strong third-quarter 2019 results and a solid guidance for the fourth quarter. However, a dull guidance for 2019 and foreign exchange headwinds raise concern.
In a year’s time, shares of Ecolab have rallied 21.9% compared with the industry’s 13.8% rise. Meanwhile, the S&P 500 Index has risen 21.2%.
With a market capitalization of $53.73 billion, Ecolab is a leading provider of water, hygiene and energy technologies and services that protect people and vital resources. The company’s earnings are anticipated to grow 12.4% over the next five years. For the trailing four quarters, the company has a positive earnings surprise of 0.3%, on average.
Let’s take a closer look at the factors that substantiate Ecolab’s Zacks Rank #3 (Hold).
Factors Working in Favor
In the recently reported third quarter of 2019, Ecolab reported adjusted earnings per share (EPS) of $1.71, up 11.8% on a year-over-year basis.
Revenues amounted to $3.82 billion, up 1.9% from the year-ago quarter number.
Notably, core segments — Global Industrial, Global Institutional and Other — made strong contributions to the top line.
While revenues at Global Industrial grew 5.2%, the same at Global Institutional rose 4% year over year.
Per management, growth in Water, Food & Beverage and Life Sciences units and Ecolab’s Specialty business drove the upside.
The Other unit grew 6.8% year over year on strong gains in both Pest Elimination and Colloidal Technologies.
Reflective of this, the company expects fourth-quarter adjusted EPS within $1.64-$1.74, suggesting year-over-year growth of 6-13%.
Adjusted gross margin is expected to be 42% of quarterly sales for the fourth quarter as well as 2019.
Factors Deterring the Stock
In the third quarter, Ecolab’s Global Energy sales dropped 2.7% year over year owing to lower upstream sales.
Hence, for 2019, Ecolab expects adjusted EPS within $5.80-$5.90, calling for 10-12% growth over 2018. The projected band is lower than the previously-communicated range of $5.80-$6.00.
Also, foreign currency translation is expected to have a 13-cent unfavorable impact on adjusted EPS.
Ecolab Inc. Price and Consensus
Ecolab Inc. price-consensus-chart | Ecolab Inc. Quote
Which Way Are Estimates Headed?
For 2019, the Zacks Consensus Estimate for revenues is pegged at $15 billion, indicating an improvement of 2.3% from the year-ago reported figure. For adjusted earnings, the same stands at $5.86 per share, suggesting growth of 11.6% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are CONMED Corporation (CNMD - Free Report) , HealthEquity (HQY - Free Report) and West Pharmaceutical Services (WST - Free Report) . While CONMED and West Pharmaceutical each currently carrying a Zacks Rank #2 (Buy), HealthEquity sports a Zacks Rank #1 (Strong Buy).. You can see the complete list of today’s Zacks #1 Rank stocks here.
Conmed has a long-term earnings growth rate of 17%.
HealthEquity has a long-term earnings growth rate of 25%.
West Pharmaceuticals has a long-term earnings growth rate of 14%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>