Yahoo Finance Factors Setting the Tone for Ecolab's (ECL) Q1 Earnings
Ecolab, Inc. ECL is scheduled to report first-quarter 2024 results on Apr 30, before the opening bell.
In the last reported quarter, the company’s earnings per share (EPS) of $1.55 surpassed the Zacks Consensus Estimate by 0.7%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, delivering an earnings surprise of 1.7%, on average.
Let’s see how things have shaped up for Ecolab prior to this announcement.
Global Industrial
The Global Industrial segment, comprising the Water, Food & Beverage, Paper and Downstream units, witnessed a sales uptick in the fourth quarter of 2023. Per the company’s fourth-quarter earnings call in February, the Water and the Food & Beverage businesses have been performing well for the past few months. Per management, the company’s two platform innovations — Ecolab Science Certified and Ecolab Water for Climate — have been progressing well with a few big customers. However, as the Ecolab Water for Climate’s setup is different because it is expected to help its customers get to their ambition of net zero, the segment is likely to have witnessed a slower adoption. We are optimistic about the continued strength in Ecolab’s Water business and expect it to have significantly boosted the company’s first-quarter revenues.
However, management was not encouraged with the performance of the Paper business over the past few months, which continued to be impacted by soft industry demand. On a positive note, management is optimistic about the business’s continued volume growth as Ecolab continues to transform the business. This is likely to have a positive impact on the segmental revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for the first-quarter Global Industrial segment revenues is currently pegged at $1.76 billion, suggesting an uptick of 3.6% from the year-ago quarter’s reported figure.
Ecolab Inc. Price and EPS Surprise
Ecolab Inc. price-eps-surprise | Ecolab Inc. Quote
Global Institutional & Specialty
Ecolab’s Global Institutional & Specialty segment recorded strong growth in the last reported quarter, courtesy of the company’s performance in the Institutional and Specialty divisions. On the earnings call, management confirmed that the Institutional unit’s growth was solid in China. Management alco commented that the volume in Institutional business has been solid over the past few months. This is likely to have resulted from great momentum driving volume, driving share, getting price and driving margin.
Per management, the Specialty business witnessed an improvement on both the quick serve restaurants (QSR) and the food retail side. Management feels that QSR is an industry that has been doing well at all times, especially in more difficult times, because people have a tendency to trade down, and when they move from full-service restaurants to QSR, Ecolab can leverage that at a high margin. This trend is likely to have continued in the first quarter, thereby contributing to segmental revenues.
Ecolab’s to-be-reported quarter’s segmental revenues are also likely to have benefited from new business wins.
The Zacks Consensus Estimate for the first-quarter Global Institutional & Specialty segment revenues is currently pegged at $1.21 billion, suggesting an uptick of 7% from the year-ago quarter’s reported figure.
Other Factors at Work
Sustained strong demand for Pest Elimination (a component of Ecolab’s broader Other segment) in commercial businesses is likely to have driven the segment’s revenues in the to-be-reported quarter.
Ecolab’s ongoing investments in new capabilities and new capacity, enabling it to gain market share in the Life Sciences business’s attractive long-term high-growth and high-margin market, also raise our optimism about the company’s first-quarter 2024 performance.
However, management sounded cautious regarding continued soft macro demand. Also, Ecolab mentioned in its fourth-quarter earnings call that it continues to expect the Life Sciences market to remain soft for the next few quarters. This raises our apprehension about the stock.
The Estimate Picture
For first-quarter 2024, the Zacks Consensus Estimate of $3.75 billion for total revenues implies an improvement of 4.9% from the prior-year quarter’s reported figure.
The consensus estimate for EPS is pegged at $1.33, implying an improvement of 51.1% from the prior-year period’s reported number.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has higher chances of beating estimates. This is not the case here, as you can see below.
Earnings ESP: Ecolab has an Earnings ESP of -0.82%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #2.
Stocks Worth a Look
Here are a few other medical stocks worth considering, as these also have the right combination of elements to beat on earnings this reporting cycle.
Tenet Healthcare Corporation THC has an Earnings ESP of +5.65% and a Zacks Rank of 2. THC has an estimated long-term growth rate of 5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tenet Healthcare’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 31.6%.
Universal Health Services, Inc. UHS has an Earnings ESP of +2.29% and is a Zacks Rank #2 stock. UHS has an estimated long-term growth rate of 15%.
Universal Health’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 8.1%.
Blueprint Medicines Corporation BPMC has an Earnings ESP of +16.92% and a Zacks Rank of 2. BPMC has an estimated long-term growth rate of 34%.
Blueprint Medicines’ earnings surpassed estimates in all the trailing four quarters, with the average surprise being 13.3%.
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Ecolab Inc. (ECL) : Free Stock Analysis Report
Universal Health Services, Inc. (UHS) : Free Stock Analysis Report
Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
Blueprint Medicines Corporation (BPMC) : Free Stock Analysis Report