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Ecolab (ECL) Q1 Earnings & Revenues Beat, Margins Up

Ecolab Inc. ECL reported first-quarter 2022 adjusted earnings per share (EPS) of 88 cents, up 7.3% year over year. The bottom line exceeded the Zacks Consensus Estimate by 2.3%.

We had projected first-quarter adjusted EPS of 82 cents.

GAAP EPS for the quarter was 82 cents, up 36.7% year over year.

Revenue Details

Revenues grossed $3.57 billion in the reported quarter, up 9.3% year over year. The metric surpassed the Zacks Consensus Estimate by 2.9%.

The first-quarter revenue compares to our estimate of $3.34 billion.

Ecolab’s organic sales increased 13% from the prior-year period’s level.

The year-over-year uptick in the first quarter’s organic sales was driven by double-digit growth in the Institutional & Specialty, Industrial and Other segments and improved growth in the Healthcare & Life Sciences segment.

Segmental Analysis

The Global Industrial segment’s fixed currency sales of $1.69 billion reflect 12.4% reported growth year over year. Effective Jan 1, 2023, Ecolab’s former Downstream operating segment is now a part of the Water operating segment. However, this change did not have any impact on the Global Industrial reportable segment.

This compares to our projection of first-quarter segmental revenues of $1.64 billion.

The Global Institutional & Specialty arm’s fixed currency sales of $1.13 billion reflect reported growth of 13.6%, whereas organic sales increased 14% year over year. The continued double-digit growth in the Institutional division reflected strong pricing and new business wins. Specialty sales growth was driven by robust quickservice sales growth.

This compares to our projection of first-quarter segmental revenues of $1.06 billion.

The Global Healthcare and Life Sciences arm’s fixed currency sales of $378.6 million improved 8.7%. Organic sales growth of 9% was driven by double-digit growth in Life Sciences and strengthening Healthcare sales growth.

This compares to our projection of first-quarter segmental revenues of $370.7 million.

The Other segment’s fixed currency sales of $329.3 million improved 14.8% on a reported basis. Organic sales growth was 15%, reflecting double-digit growth across all divisions, with a continued strong performance in Pest Elimination.

This compares to our projection of first-quarter segmental revenues of $319.3 million.

Ecolab Inc. Price, Consensus and EPS Surprise

Ecolab Inc. Price, Consensus and EPS Surprise
Ecolab Inc. Price, Consensus and EPS Surprise

Ecolab Inc. price-consensus-eps-surprise-chart | Ecolab Inc. Quote

Margin Analysis

In the quarter under review, Ecolab’s gross profit improved 14.5% to $1.37 billion. The gross margin expanded 173 basis points (bps) to 38.3%.

We had projected 34.4% of gross margin for the first quarter.

Selling, general and administrative expenses rose 8.3% to $990.3 million year over year.

Adjusted operating profit totaled $376.1 million, increasing 34.9% from the prior-year quarter’s level. Adjusted operating margin in the quarter also expanded 200 bps to 10.5%.

Financial Position

Ecolab exited first-quarter 2023 with cash and cash equivalents of $419.4 million compared with $598.6 million at the end of 2022. Total debt at the end of first-quarter 2023 was $8.64 billion compared with $8.58 billion at the end of 2022.

Meanwhile, Ecolab has a consistent dividend-paying history, with five-year annualized dividend growth being 4.47%.

Guidance

Ecolab has not provided its 2023 outlook. However, it expects to deliver performance that improves throughout 2023 despite a challenging macro environment characterized by high delivered product costs and easing demand.

Ecolab has provided its adjusted EPS outlook for the second quarter of 2023. The company expects its adjusted EPS to be in the range of $1.15-$1.25, up by 5-14% over the prior-year period. The Zacks Consensus Estimate for the quarter is currently pegged at $1.19.

Our Take

Ecolab exited the first quarter of 2023 with better-than-expected results. The company registered a robust year-over-year uptick in its top and bottom lines, along with solid performances across all segments. Strong pricing momentum was also encouraging. Ecolab’s new business wins and innovation pipelines are well-positioned to drive growth and global leadership. The company’s digital capabilities are also continuing to broaden, develop and add competitive advantages, which are encouraging. The expansion of both margins bodes well for the stock.

However, the company faced significant delivered product cost inflation, challenging macroeconomic conditions and unfavorable currency translation, which weighed on its top-line growth.

Zacks Rank and Key Picks

Ecolab currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation EW, Intuitive Surgical, Inc. ISRG and Merit Medical Systems, Inc. MMSI.

Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences has a long-term estimated growth rate of 6.9%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.

Intuitive Surgical, having a Zacks Rank #2, reported first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.

Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.

Merit Medical reported first-quarter 2023 adjusted EPS of 64 cents, beating the Zacks Consensus Estimate by 16.4%. Revenues of $297.6 million surpassed the Zacks Consensus Estimate by 5.9%. It currently carries a Zacks Rank #2.

Merit Medical has a long-term estimated growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.

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Ecolab Inc. (ECL) : Free Stock Analysis Report

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Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report

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