Ecolab's (ECL) Q3 Earnings Beat, Revenues Miss Estimates

Ecolab Inc. (NYSE:ECL) reported adjusted earnings (excluding special gains, charges and tax items) of $1.28 per share in the third quarter of 2016, which exceeded the Zacks Consensus Estimate by a penny. However, earnings remained flat on a year-over-year basis.

Adjusted net sales were $3.39 billion, down 1.74% from the year-ago quarter. Also, net sales lagged the Zacks Consensus Estimate of $3.46 billion.

Quarter Details

Global Industrial segment sales grew 2% year over year to almost $1.18 billion at fixed currency. This was driven by gains in Food & Beverage, with modest growth in Water and Paper sales. Acquisition adjusted fixed currency operating income soared 12% fueled by lower delivered product costs, appropriate pricing and cost savings initiatives.

Global Institutional segment sales increased 6% to $1.16 billion, led by strong growth in the institutional and Specialty businesses. Acquisition adjusted fixed currency operating income increased 6% owing to strong growth from the Specialty and Institutional business. Sales were strong in North America, Asia Pacific, Latin America and Europe as well.

Global Energy acquisition adjusted fixed currency sales decreased 8% owing to a drop in the company’s upstream business revenues.

Sales from the Other segment climbed 8% year over year to $210.5 million on account of strong growth in both Pest Elimination and Equipment Care businesses.

The company witnessed a 50% increase in fixed currency operating income. However, excluding special gains and charges, third-quarter 2016 adjusted operating income was flat with the figure reported in the same quarter last year. Notably, at fixed currency rates, adjusted fixed currency operating income increased 5%.

Outlook

For the fourth 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 31%. Interest expenses are projected at around $70 million.

Adjusted earnings are estimated between $1.23 and $1.33 per share. Unfavorable foreign currency and the impact of Venezuelan deconsolidation are anticipated to impact earnings by 2 cents.

For 2016, Ecolab expects adjusted gross margin to be 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 $265 million.

Ecolab forecasted its adjusted earnings between $4.35 and $4.45 per share (previous range was $4.35 to $4.55). Unfavorable foreign currency and the impact of Venezuelan deconsolidation are expected to hurt earnings by 30 cents.

Zacks Rank & Stocks to Consider

Currently, Ecolab carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector are Intuitive Surgical Inc. (NASDAQ:ISRG) , AngioDynamics Inc. (NASDAQ:ANGO) and Glaukos Corporation (NYSE:GKOS) .

Notably, Intuitive Surgical carries a Zacks Rank #2 while Glaukos and AngioDynamics sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical has a long-term expected earnings growth rate of approximately 11.35%. The stock represents an impressive one-year return of roughly 33.3%.

AngioDynamics has a long-term expected earnings growth rate of 15.00%. The company posted a solid one-year return of almost 26.1%.

Glaukos Corporation recorded a stellar one-year return of almost 77.8%. Notably, the company posted positive surprises in the past four quarters, the average being 110.93%.

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