Ecolab Inc. (NYSE:ECL) reported fourth-quarter 2017 adjusted earnings of $1.39 per share, which missed the Zacks Consensus Estimate by a penny. Earnings improved from $1.25 in the year-ago quarter.
Ecolab carries a Zacks Rank #3 (Hold).
Including net discrete tax benefit from U.S. Tax Reform of 55 cents per share, Ecolab registered earnings of $1.93 on reported basis.
Adjusted quarterly net sales were $3.56 billion, up 7.2% from the year-ago quarter. Also, net sales missed the Zacks Consensus Estimate of $3.62 billion.
Ecolab Inc. Price, Consensus and EPS Surprise
Segmental Analysis
Global Industrial Segment
Sales in the segment grew 6.1% year over year to almost $1.29 billion. The upside was driven by major gains in Water, Food & Beverage and Life Sciences unit.
Europe, North America and Latin America led the Global Industrial regional growth. Acquisition-adjusted fixed currency operating income improved 4% on a year-over-year basis.
Global Institutional Segment
Sales increased 8.5% to $1.22 billion, led by strong growth in the Specialty business line. The segment witnessed solid growth in North America and Asia Pacific.
Acquisition-adjusted fixed currency operating income remained flat year over year.
Global Energy Segment
Sales rose 10.8% to $853.2 million owing to strong growth in the well stimulation business and modest gains in the downstream business.
Acquisition-adjusted fixed currency operating income increased 4% year over year.
Other Segment
Sales declined 6.8% year over year to $189.7 million. Sales in this segment witnessed robust growth in North America.
Margin Analysis
As a percentage of revenues, Ecolab registered adjusted gross margin of 47.1% in the fourth quarter, down 100 basis points (bps) on a year-over-year basis.
Adjusted operating margin in the fourth quarter contracted 70 bps to to 16.2% of net revenues.
Outlook
Ecolab expects full-year 2018 adjusted earnings in the range of $5.25-$5.45 per share, up 12-16% year over year.
As a percentage of revenues, adjusted gross margin is expected in the range of 47-48%.
For the first quarter of 2018, Ecolab expects adjusted earnings in the range of 85-93 cents per share, up from the previous range of 84-92 cents. The current outlook reflects an increase of 6-16% year over year.
Adjusted Gross Margin for the first quarter of 2018 is expected to be 46% of net revenues.
Our Take
Ecolab ended the fourth quarter on an unfavorable note, missing the Zacks Consensus Estimate on both the counts. Despite strength in Pest Elimination business, the Other segment declined year over year on reported basis. Ecolab operates in highly competitive markets, which might mar prospects over the long haul.
We believe that volatility in foreign currency exchange rates will remain a significant headwind for the company. Ecolab faces pricing pressure in the Energy segment which is likely to hurt profits.
On the brighter side, a strong guidance instills optimism on the stock. Further, Europe, North America and Latin America led the Global Industrial regional growth in the quarter. Strength in the Global Institutional segment led by growth in the Specialty and Healthcare business lines is also a positive. A robust product portfolio and expanding customer base is likely to drive organic sales over the long haul.
Key Picks
A few better-ranked stocks that reported solid results this earnings season are PetMed Express (NASDAQ:PETS) , PerkinElmer (NYSE:PKI) and Becton, Dickinson and Company (NYSE:BDX) . While PetMed sports a Zacks Rank #1 (Strong Buy), PerkinElmer and Becton, Dickinson carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
PetMed reported third-quarter fiscal 2018 adjusted earnings per share of 44 cents, up 88.3% from the prior-year quarter. Revenues rose 13.7% to $60.1 million.
PerkinElmer posted fourth-quarter 2017 adjusted earnings per share of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million in the year-ago quarter.
Becton, Dickinson reported first-quarter fiscal 2018 adjusted earnings per share of $2.48, up 3.9% at constant currency. Revenues totaled $3.08 billion, up 3.7% at constant currency.
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