Ecolab (ECL): Can It Spring A Surprise In Q3 Earnings?

Ecolab Inc. (NYSE:ECL) is slated to announce third-quarter 2016 earnings results on Nov 1. Last quarter, the company reported earnings of $1.08 per share, in line with the Zacks Consensus Estimate.

Notably, Ecolab posted a negative earnings surprise of 0.07% on average over the last four quarters.

Let’s see how things are shaping up for this announcement.

Factors at Play

For the third quarter of 2016, Ecolab projects adjusted earnings 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. Energy segment sales are also expected to decline approximately 10%.

Despite these headwinds, we believe that a robust product portfolio, new product launches and an expanding customer base will drive organic sales.

Moreover, emerging markets hold promise for Ecolab in the food & beverage business. The company believes that food safety business has significant growth opportunities in these markets due to growing demand for better food quality.

Apart from food & beverage, Ecolab is expected to pursue acquisitions that will boost its market share in the water and healthcare business. Meanwhile, the realization of targeted synergies associated with acquisitions will help in margin expansion.

Earnings Whispers

Our proven model does not conclusively show that Ecolab is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Ecolab currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.08. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

Zacks Rank: Ecolab currently carries a Zacks Rank #3 which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Glaukos Corporation (NYSE:GKOS) has an earnings ESP of +200% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Penumbra, Inc. (NYSE:PEN) has an earnings ESP of +45.46% and a Zacks Rank #2.

Invuity, Inc. (NASDAQ:IVTY) has an earnings ESP of +1.61% and a Zacks Rank #2.

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