Ecolab Beats, Guides Higher - Analyst Blog
April 26 2011 - 10:08AM
Zacks
Leading cleaning and sanitation products maker Ecolab
Inc. (ECL) reported first-quarter fiscal 2011 adjusted
(excluding special gains/charges and tax related adjustments)
earnings of 45 cents, ahead of the Zacks Consensus Estimate of 44
cents while exceeding the year-ago adjusted earnings of 41
cents.
Net income (attributable to Ecolab) for the quarter, however,
dipped 2% year over year to $93.6 million (or 40 cents a share),
impacted by charges associated with the European
restructuring and acquisition as well as higher tax, which masked
an increase in the top line.
Net sales rose 6% year over year (up 4% at constant currency
rates) to $1,518.3 million, beating the Zacks Consensus Estimate of
$1,485 million.
The results were led by strong performances across the
Minnesota-based company’s core U.S. Cleaning & Sanitizing
business as well as Asia-Pacific and Latin American operations.
Currency exchange translation had a favorable impact on first quarter
results. Ecolab has taken appropriate
actions (including proper pricing) in the quarter to offset
the hike in raw material costs.
Segment Results
Revenues from Ecolab’s U.S. Cleaning & Sanitizing division,
its mainstay in the U.S., climbed 8% year over year to $682
million, with sales improving across Institutional, Food &
Beverage and Kay sub-segments.
Sales at the U.S. Other Services segment rose 2% to $107
million. Revenues (at constant currency) from International
operations rose 5% year over year to $716 million, supported by the
emerging markets.
Margins
Operating margin declined to 10% from 10.7% a year-ago, as
higher costs more than offset revenue growth. Gross margin fell to
49.3% from 50% a year-ago as a result of a 7% increase in cost of
sales.
Financial Condition
Ecolab exited the quarter with cash and cash equivalents of
$151.4 million, a roughly 77% year over year increase. Long-term
debt increased modestly year over year to $683.7 million. The
company bought back 1.5 million shares during the quarter.
Outlook and Recommendation
Ecolab has raised its fiscal 2011adjusted earnings per share
target to between $2.49 and $2.53 from its earlier forecast of
$2.47 and $2.53. For second-quarter 2011, the company expects
adjusted earnings between 62 cents and 64 cents a share. The
current Zacks Consensus Estimates for second quarter and fiscal
2011 are 62 cents and $2.49, respectively.
Adjusted gross margin for the second quarter has been pegged at
roughly 50%. Moreover, Ecolab expects improved year -over- year
revenue growth in the quarter.
Although we are impressed with Ecolab’s strong international
exposure, we remain concerned about intense competition. The
company’s U.S. Cleaning & Sanitizing and International
divisions face stiff competition from Clorox (CLX)
and Church & Dwight (CHD).
Moreover, raw material price fluctuations represent a headwind
for Ecolab and its aggressive acquisition strategy has inherent
integration risks. We are currently Neutral on Ecolab.
CHURCH & DWIGHT (CHD): Free Stock Analysis Report
CLOROX CO (CLX): Free Stock Analysis Report
ECOLAB INC (ECL): Free Stock Analysis Report
Zacks Investment Research
Ecolab (NYSE:ECL)
Historical Stock Chart
From Sep 2024 to Oct 2024
Ecolab (NYSE:ECL)
Historical Stock Chart
From Oct 2023 to Oct 2024