Ecolab Inc ECL is gaining on product portfolio expansion and acquisitions. However, tough competition has been offsetting the positives to some extent.
The company, with a market capitalization of $61.35 billion, is the leading provider of water, hygiene and energy technologies and services. The company’s earnings are anticipated to improve 10.4% over the next five years. This Zacks Rank #3 (Hold) company has a trailing four-quarter positive earnings surprise of 1.1%, on average.
In the past three months, the stock has gained 11.1% compared with 49.6% rise of its industry.
Let’s delve deeper into the factors working in favor of the company.
Solid Product Portfolio: Ecolab has major launches underway, including the Smartpowerware wash platform, which is expected to drive institutional improvement. Ecolab also continues to invest significantly in customer-facing and infrastructure technology.
Ecolab has been gaining traction in digital technology markets. The company expects huge investments in the coming quarters to enhance its digital portfolio. New customer digital programs like SMARTPOWER, 3D CIP, 3D TRASAR, the new QSR and FRS digital safety platforms continue to improve field efficiency, customer service and capability.
Global Industrial Drives Growth: Sales at the segment grew 3.3% year over year to $1.44 billion on solid growth in Food & Beverage and favorable performance by Downstream and Paper divisions.
Notably, the acquisition of New York-based Cascade Water Services Inc. has strengthened Ecolab’sGlobal Industrial unit.
Strategic Acquisitions & Divestments: Ecolab continues to focus on investment in key growth businesses and bolt-on acquisitions to gain market traction and boost profits.
In May, Ecolab completedits buyout of CID Lines, a leading global provider of livestock biosecurity and hygiene solutions.
By utilizing its combined strengths and expertise, the company plans to help develop and expand hygiene solutions for the food industry.
In the recent past, Nalco Champion, an Ecolab company, collaborated with Accenture and Microsoft to launch a unified, digital platform – Refined Knowledge – powered by ECOLAB3D.
On Dec 19, 2019, Ecolab entered into a definitive agreement wherein it decided to separate the ChampionX business while combining it with Apergy Corporation in a tax-free Reverse Morris Trust transaction. The transaction is likely to build a stronger business that can push through the current downturn and also become a successful, long-term market leader with more robust cash generation, low capital intensity and large base of consumable revenues.
The transaction is anticipated to be completed by the end of second-quarter 2020. On separation, ChampionX will be accounted as a discontinued operation for Ecolab’s full-year 2020 results.
However, there is a factor marring growth.
Cut-throat Competition: Ecolab operates in highly competitive markets. The company’s competitors can be grouped into two classes: large companies selling directly or through distributors, and many smaller regional players who focus on limited geographical areas, product line, and/or end-user division. Notably, Ecolab faces competition from bigwigs like P&G, Unilever, PuroClean and ChemStation. The company’s U.S. Cleaning & Sanitizing and International divisions face stiff competition from Clorox and Church & Dwight.
Over the past 60 days, the Zacks Consensus Estimate for the company’s fiscal 2020 earnings has declined 13.4% to $4.94.
The Zacks Consensus Estimate for its second-quarter 2020 revenues is pegged at $3.15 billion, suggesting a 16.1% fall from the year-ago reported number.
Some better-ranked stocks from the broader medical space are Aphria APHA, DexCom DXCM and HMS Holdings HMSY.
Aphria’s long-term earnings growth rate is estimated at 24.6%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DexCom’s long-term earnings growth rate is estimated at 36.3%. The company presently carries a Zacks Rank #2.
HMS Holdings’ long-term earnings growth rate is estimated at 10%. It currently carries a Zacks Rank #2.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ecolab Inc. (ECL) : Free Stock Analysis Report
DexCom, Inc. (DXCM) : Free Stock Analysis Report
HMS Holdings Corp (HMSY) : Free Stock Analysis Report
Aphria Inc. (APHA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research