Why is Ecolab (ECL) up 0.5% since its last earnings report?

It has been about a month since Ecolab’s (ECL) last earnings report. Shares rose about 0.5% in that time, underperforming the S&P 500.

Will the recent positive trend continue until its next earnings release, or is Ecolab headed for a recession? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to better understand the important catalysts.

Ecolab’s first-quarter earnings beat estimates, margins expand

Ecolab Inc. reported first-quarter 2024 adjusted earnings per share of $1.34, up 52.3% year-over-year. The earnings beat the Zacks Consensus Estimate by 0.8%.

GAAP earnings per share for the quarter were $1.43, up 74.4% year over year.

Revenue details

Revenue for the quarter was $3.75 billion, up 5% year-over-year. This figure surpassed the Zacks Consensus Estimate by 0.1%.

Ecolab’s organic sales increased 4.5% compared to prior-year levels.

The year-over-year increase in organic sales in the first quarter was driven by strong growth in the Institutional & Specialty and Pest Control segments and moderate growth in the Industrial segment.

Segment analysis

Global Industrial segment sales in constant currency of $1.84 billion reflect recorded year-over-year growth of 1.9%. Organic sales increased 1.2% year-over-year as moderate growth in the Food & Beverage and Water segments (despite unfavorable year-over-year comparisons in mining) more than offset the expected near-term decline in paper sales.

Global Institutional & Specialty division sales in constant currency of $1.27 billion reflect growth of 12.3%. Organic sales increased 10.7% year-over-year, with double-digit growth in both the institutional and specialty divisions.

Global Healthcare and Life Sciences sales in constant currency of $382.9 million decreased 0.8% on both a reported and organic basis. On a management basis, organic sales declined year-over-year as lower healthcare sales were partially offset by growth in life sciences. Life Sciences sector performance improved, more than offsetting continued mild near-term industry trends.

Global Pest Elimination segment sales on a constant currency basis of $266.8 million increased 9.1% on both a reported and organic basis. Organic sales growth was driven by strong growth in the food and beverage, restaurant and food retail segments.

Margin analysis

For the quarter, Ecolab’s gross profit increased 18.8% to $1.62 billion. Gross margin increased 502 basis points (bps) to 43.3%.

The story continues

Selling, general and administrative expenses increased 8.8% year over year to $1.08 billion.

Adjusted operating profit was $546.1 million, up 45.2% from the prior-year level. Adjusted operating margin for the quarter also increased 403 bps to 14.6%.

Financial position

Ecolab ended the first quarter of 2024 with cash and cash equivalents of $479.9 million compared to $919.5 million at the end of 2023. Total debt at the end of the first quarter of 2024 was $7.54 billion compared from USD 8.18 billion at the end of 2023

Net cash from operating activities at the end of the first quarter of 2024 was $649.4 million, compared to $198.2 million a year ago.

Meanwhile, Ecolab has been a consistent dividend payer, with a five-year annual dividend increase of 4.44%.

Conductivity

Ecolab provided a revised EPS forecast for the second quarter of 2024 and raised its full-year forecast.

The company expects second-quarter adjusted EPS to be $1.62-$1.72, up 31-39% from the year-ago period. The Zacks Consensus Estimate estimates second-quarter EPS at $1.52.

Ecolab now expects 2024 adjusted EPS to be $6.40-$6.70 (reflecting an increase of 23-29% compared to the comparable 2023 period), compared to the previous forecast of $6.10-6. $50 (reflecting an increase of 17-25%). from the comparable period of 2023). The Zacks Consensus Estimate is currently at $6.42 per share.

How have estimates changed since then?

It turns out that the review estimates have been trending upwards over the past month.

As a result of these changes, the consensus estimate moved by 9.17%.

VGM results

At this point, Ecolab boasts a great Growth Score of A, although it lags significantly behind its Momentum Score with a D. Following the exact same trajectory, the stock is rated D for value, placing it in the bottom 40% for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for the stock are trending upwards, and the scale of these revisions looks promising. It’s no surprise that Ecolab has a Zacks Rank #2 (Buy). We expect an above-average rate of return on shares in the coming months.

Industry player performance

Ecolab is part of the Zacks Chemical – Specialty industry. Over the past month, shares of the same industry Element Solutions (ESI) have gained 1.8%. More than a month ago, the company published its results for the quarter ended March 2024.

In the most recent quarter, Element Solutions reported revenue of $575 million, representing a +0.1% year-over-year change. EPS of $0.34 for the same period compared to $0.30 a year ago.

For the current quarter, Element Solutions is expected to report earnings per share of $0.33, which would represent a year-over-year change of +6.5%. Over the past 30 days, the Zacks Consensus Estimate has moved -4.4%.

Element Solutions carries a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Rating of D.

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