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Ecolab (ECL) Beats Earnings & Revenues in Q3, Cuts 2017 View

Ecolab Inc. ECL reported third-quarter 2017 adjusted earnings (excluding special gains, charges and tax items) of $1.37 per share, which beat the Zacks Consensus Estimate by a penny. Earnings improved from $1.28 in the year-ago quarter. Ecolab carries a Zacks Rank #4 (Sell).

Adjusted quarterly net sales were $3.56 billion, up 5% from the year-ago quarter. Also, net sales surpassed the Zacks Consensus Estimate of $3.55 billion on business gains, better pricing, product innovation and cost efficiencies. These have more than offset higher delivered product costs. However, Ecolab expects the impact of the hurricanes on fourth-quarter sales and costs to be approximately 4 cents per share.

Ecolab announced an agreement to divest its Equipment Care business recently. The transaction is expected to close by the end of the year (read more: Ecolab to Divest Equipment Care Segment, Shares Fall).

Ecolab Inc. Price, Consensus and EPS Surprise

 

Quarter Details

Global Industrial Segment: Sales at the segment grew 3.8% year over year to almost $1.25 billion. This was driven by major gains in Paper, with modest increases in Food & Beverage and Water.

North America and Latin America led the Global Industrial regional growth. Acquisition-adjusted fixed currency operating income declined 2% due to higher delivered product costs.

However, hurricanes dented third-quarter sales at the segment by approximately 1% and operating income by around 2%.

Global Institutional Segment: Sales increased 6.6% to $1.22 billion, led by strong growth in the Specialty and Healthcare business lines.

Acquisition-adjusted fixed currency operating income increased 2% as pricing and sales volume gains more than offset innovation cum customer investments and higher delivered product costs.

However, hurricanes affected third-quarter sales at the segment by less than 1% and operating income by approximately 1%.

Global Energy Segment: Sales increased 3.3% to $796.7 million owing to strong growth in the well stimulation business and modest gains in the downstream business.

Acquisition-adjusted fixed currency operating income declined 11% due to higher delivered product costs and lower pricing.

Hurricanes lowered third-quarter sales at the segment by less than 1% and operating income by around 6%.

Other segment: Sales climbed 6% year over year to $221.7 million on account of strong growth in Pest Elimination business. Sales in this segment witnessed robust growth in North America.

Fixed currency operating income rose 9% as pricing and sales volume gains were offset by higher field investments.

Outlook

Ecolab slashed its full-year earnings guidance owing to the impact of hurricanes and the divestiture of the Equipment Care business segment. The company expects adjusted earnings for the full year in the range of $4.65 to $4.75, much lower than the previously issued range of $4.70 to $4.90.

Notably, Ecolab expects the impact of the hurricanes on full-year sales and costs to be approximately 8 cents per share. Added to this, the divestiture of Equipment Care is going to hamper earnings by a penny. Adjusted margin for the full year is expected at approximately 47% of net revenues.

Coming to the fourth-quarter guidance, Ecolab expects adjusted diluted earnings per share in the band of $1.35 to $1.45, compared with $1.25 in the year-ago quarter. Adjusted gross margin in the quarter is expected to be 48% of net revenues.

Companies Reporting Solid Earnings Results

Intuitive Surgical Inc. ISRG posted adjusted earnings of $2.77 per share in the third quarter of 2017, beating the Zacks Consensus Estimate of $1.97 on stellar revenue growth. The stock has a Zacks Rank #2 (Buy).

PetMed Express, Inc.’s PETS adjusted earnings per share of 43 cents for the second quarter of fiscal 2018 were up 79.2% from the year-ago quarter. Also, earnings surpassed the Zacks Consensus Estimate by 43.3%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

athenahealth ATHN exited the third quarter of fiscal 2017 on a solid note, with earnings beating the Zacks Consensus Estimate. The stock carries a Zacks Rank #2.

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