Ecolab (ECL) to Report Q3 Earnings: What's in the Offing?

Ecolab Inc. ECL is scheduled to report third-quarter 2020 results on Oct 27, before the opening bell. The company’s core Global Industrial unit is likely to have contributed significantly to its quarterly performance despite foreign exchange headwinds.

The company’s earnings missed estimates by 21.7% in the last reported quarter.

Estimate Picture

For the to-be-reported quarter, the Zacks Consensus Estimate for revenues is pegged at $2.97 billion, suggesting fall of 22.1% from the year-ago period. The same for adjusted earnings per share is $1.11, indicating a decline of 35.1% from the prior-year quarter.

Let’s delve deeper.

Global Industrial a Boon

Although the Global Industrial segment witnessed a sales decline in the second quarter due to COVID-19 impacts, it exhibited a robust margin performance, which drove strong income gains. This positive trend is likely to have continued in the third quarter on the back of growth across Water, Food & Beverage, and Life Sciences sub-units in the third quarter.

In June, Ecolab’s subsidiary Nalco Water launched Rapid Bio Intelligence, a total aerobic bacteria test kit that drastically simplifies water chemistry testing and compliance for cooling water systems.

In the same month, the company announced that AdvaCare Disinfectant received the first approval from the U.S. Environmental Protection Agency (“EPA”). This crucial approval is for a laundry disinfectant and oxidizer emerging viral pathogen claim that is effective against SARS-CoV-2, the virus causing COVID-19.

In August, the company’s Synergex Sanitizer & Disinfectant became the first product to attain EPA approval for efficiency against biofilms, a complex community of bacteria on food contact surfaces.

These developments are likely to have driven the company’s Global Industrial segment in the to-be-reported quarter.

In February 2020, it launched Eco-Flex Teat Dip — an udder care solution to prevent infection among dairy cows, reduce cost of maintaining animal health and ensure quality milk — under the Food & Beverage sub-unit. This is likely to have bolstered the Food & Beverage business in the third quarter.

Solid prospects in the food retail segment on net new business gains are expected to get reflected in the results for the quarter to be reported. A shift from restaurants to food retail and increasing demand for hygiene programs have been driving the F&B business.

Ecolab Inc. Price and EPS Surprise

Ecolab Inc. Price and EPS Surprise

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

Other Factors at Work

It is important to mention here that the company’s Institutional and Pest Elimination business divisions were directly impacted by COVID-19-led shutdown of travel, dining as well as entertainment facilities in the second quarter. This trend is expected to have continued through the to-be reported quarter.

Nonetheless, Global Healthcare, Life Sciences and Specialty segments are expected to have seen solid sales growth during the third quarter, attributable to sustained favorable fundamental trends and increased demand for cleaning and sanitizing services.

Moreover, prudent acquisitions are expected to have been a key factor. Management is particularly optimistic about the acquisition of CID Lines (completed in May) to form a new Animal Health division. On the back of their combined strengths and experience, Ecolab will be able to build and expand hygiene solutions for the future of the food industry. This is expected to have favored the company’s third-quarter performance.

Its enhanced healthcare offerings include the next generation of open basin fluid warming systems viz. the CoreTemp Fluid Management System, which is expected to have boosted the Healthcare business in the third quarter.

Earnings Whispers

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. This is the case here as you will see below.

Earnings ESP: Ecolab has an Earnings ESP of +8.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It carries a Zacks Rank #3.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering as these too have the right combination of elements to post an earnings beat in the to-be-reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abbott Laboratories ABT has an Earnings ESP of +5.30% and a Zacks Rank of 2.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.70% and a Zacks Rank of 3 at present.

IDEXX Laboratories, Inc. IDXX has an Earnings ESP of +1.42% and is a Zacks #2 Ranked stock.

5 Stocks Set to Double

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Ecolab Inc. (ECL) : Free Stock Analysis Report
 
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