Ecolab Inc. (NYSE:ECL) reported first-quarter 2019 adjusted earnings per share (EPS) of $1.03, beating the Zacks Consensus Estimate by a penny. EPS rose 19.8% on a year-over-year basis. Per management, the company faced a headwind of 4 cents due to unfavorable currency movement.
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This Zacks Rank #3 (Hold) company’s quarterly net sales amounted to $3.51 billion, up 1% from the year-ago quarter tally. Net sales fell short of the Zacks Consensus Estimate of $3.57 billion. Acquisition and divestiture adjusted fixed currency sales increased 3% year over year.
Segmental Analysis
Global Industrial
Sales at the segment grew 4.5% year over year to almost $1.28 billion driven by major gains from the Water, Food & Beverage and Life Sciences units.
Global Institutional
Sales improved 0.2% to $1.21 billion, led by strong growth in the Specialty business. Sales for the segment showed solid growth in Latin America and Asia Pacific despite being impacted by lower distributor shipments in North America.
Global Energy
Sales at the segment declined 4% to $809.5 million owing to strong North American energy market activity. The upstream sales were hurt by declines in the well stimulation business and production sales, reflecting reduced North American industry activity. Downstream sales also declined due to lower equipment sales.
Other
Sales rose 5.3% year over year to $206.1 million, reflecting strength in Pest Elimination and Colloidal Technologies in North America.
Margin Analysis
Ecolab registered gross profit of $1.41 billion, up 0.8% year over year. As a percentage of revenues, gross margin in the quarter was 40.2%, down 10 basis points year over year. On an adjusted basis, gross margin in the quarter was 40.3%, flat year over year.
Adjusted operating margin in the quarter was $415.5 million, up 11.8% year over year. Adjusted operating margin of 11.7% expanded 80 bps year over year.
Guidance
Ecolab continues to expect 2019 adjusted EPS within $5.80 to $6.00, suggesting a 10% to 14% rise over 2018 figure. The Zacks Consensus Estimate for the same is pegged at $5.91, near the high end of the guidance.
However, Ecolab expects foreign currency translation to have an unfavorable impact of 11 cents on earnings.
Adjusted gross margin is expected between 41% and 42%.
For the second quarter of 2019, the company expects adjusted EPS within $1.36 to $1.46, indicating a rise of 7-15% year over year. The Zacks Consensus Estimate for the same stands at $1.42, near the high end of the guided range.
Ecolab expects unfavourable foreign currency movements to impact EPS by 5 cents.
Adjusted gross margin is expected at 42%.
Wrapping Up
Ecolab ended the first quarter on a tepid note. The company continues to gain from its core Global Industrial and Global Institutional segments. Ecolab also benefited from strength in Pest Control and Colloidal technologies in the quarter, which drove its Other segment. Management is optimistic about the spin-off of its Upstream Energy business as a standalone publicly-traded company and acquisitions which are likely to drive segmental gains in the quarters ahead. Ecolab’s cost-efficiency initiative is expected to result in approximately $200 million of SG&A savings by 2021. North America, Asia Pacific and Latin America drove Global Institutional unit in the quarter. Expansion in operating margin is encouraging as well.
On the flip side, year-over-year decline in the Global Energy arm raises concern. Quarterly EPS was negatively impacted by unfavorable currency movement. In fact, management expects foreign exchange to mar EPS in the quarters ahead. The company operates in highly competitive markets, which adds to the woes.
Earnings of Other MedTech Majors at a Glance
Some better-ranked stocks which posted solid results this earning season are Stryker Corporation (NYSE:SYK) , Abbott Laboratories (NYSE:ABT) and CONMED Corporation (NASDAQ:CNMD) , each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Stryker delivered first-quarter 2019 adjusted EPS of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the Zacks Consensus Estimate.
Abbott reported first-quarter 2019 adjusted EPS of 63 cents, beating the Zacks Consensus Estimate by 3.3%. First-quarter worldwide sales came in at $7.54 billion, above the Zacks Consensus Estimate of $7.47 billion.
CONMED posted first-quarter 2019 adjusted EPS of 57 cents, which beat the Zacks Consensus Estimate of 54 cents. Revenues were $218.4 million, surpassing the consensus estimate of $213 million.
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Abbott Laboratories (ABT): Free Stock Analysis Report
Ecolab Inc. (ECL): Free Stock Analysis Report
Stryker Corporation (SYK): Free Stock Analysis Report
CONMED Corporation (CNMD): Free Stock Analysis Report
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