Ecolab Inc. ECL reported third-quarter 2024 adjusted earnings per share (EPS) of $1.83, up 18.8% year over year. The bottom line beat the Zacks Consensus Estimate by 0.5%.
GAAP EPS for the quarter was $2.58, up 82.9% year over year.
Revenue Details
Revenues grossed $3.99 billion in the reported quarter, up 1% year over year. The metric missed the Zacks Consensus Estimate by 0.8%.
Ecolab’s organic sales increased 3.9% from the prior-year period’s level.
The year-over-year uptick in third-quarter organic sales was driven by strong growth in the Institutional & Specialty and Industrial segments.
Ecolab Inc. Price, Consensus and EPS Surprise
Ecolab Inc. Price, Consensus and EPS Surprise
Ecolab Inc. price-consensus-eps-surprise-chart | Ecolab Inc. Quote
Segmental Analysis
In August, Ecolab completed the sale of its global surgical solutions business to Medline for approximately $950 million in cash. However, Ecolab continues to serve hospitals through its infection prevention and instrument reprocessing businesses.
The Global Industrial segment’s fixed currency sales of $1.99 billion reflect 2.7% reported growth year over year. Organic sales increased 2% year over year, driven by accelerating Water sales growth. Water’s performance was led by strong growth in downstream and light water.
Food & Beverage sales reflected good new business wins. Paper sales were stable compared to year-ago quarter’s performance.
The Global Institutional & Specialty arm’s fixed currency sales of $1.40 billion reflect reported and organic growth of 6.8%. Growth in organic sales was driven by the Institutional and Specialty businesses’ robust performance, continuing to significantly outperform end-market trends.
The Global Healthcare and Life Sciences arm’s fixed currency sales of $334.1 million declined 18.2% on a reported basis, primarily due to the sale of the global surgical solutions business. However, organic sales increased 0.7% year over year due to the continued growth in Life Sciences and stable Healthcare sales.
The Global Pest Elimination segment’s fixed currency sales of $308.7 million improved 9% on a reported basis. Organic sales increased 7.8% year over year, driven by robust growth in food & beverage, restaurants, and food retail.
Margin Analysis
In the quarter under review, Ecolab’s gross profit improved 6.7% year over year to $1.74 billion. The gross margin expanded 230 basis points (bps) to 43.4%.
Selling, general and administrative expenses remained flat at $1.02 billion.
Adjusted operating profit totaled $713.1 million, increasing 17.2% from the prior-year quarter’s level. Adjusted operating margin in the quarter also expanded 250 bps to 17.9%.
Financial Position
Ecolab exited third-quarter 2024 with cash and cash equivalents of $1.26 billion compared with $384 million at the second quarter of 2024-end. Total debt at the third-quarter end was $7.62 billion compared with $7.54 billion at the second quarter of 2024-end.
Net cash provided by operating activities at the third quarter of 2024-end was $786.7 million compared with $787.7 million a year ago.
Meanwhile, Ecolab has a consistent dividend-paying history, with a five-year annualized dividend growth of 4.68%.
Guidance
Ecolab has provided its adjusted EPS outlook for the fourth quarter of 2024 and increased its EPS view for the full year.
The company expects its adjusted EPS for the fourth quarter to be in the range of $1.75-$1.85, up 13-19% from the year-ago period. The Zacks Consensus Estimate for fourth-quarter EPS is currently pegged at $1.81.
For 2024, Ecolab now expects its adjusted EPS in the range of $6.60-$6.70 (reflecting an uptick of 27-29% from the comparable 2023 period), up from the previous outlook of $6.50-$6.70. The Zacks Consensus Estimate is currently pegged at $6.65 per share.
Our Take
Ecolab exited the third quarter of 2024 with mixed results. The company registered a robust year-over-year uptick in its top and bottom lines, along with solid performances across the majority of its segments. Lower delivered product costs, value-based pricing and volume growth during the quarter were encouraging. New business wins were also promising for the stock. The expansion of both margins bodes well for the stock.
Per management, assuming stable macroeconomic demand, Ecolab expects continued solid sales growth driven by value pricing and new business gains. The company expects to leverage this growth with attractive organic operating income margin expansion, driven by robust increases in gross margin.
ECL’s Zacks Rank and Key Picks
Ecolab currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Addus HomeCare ADUS, Quest Diagnostics DGX and RadNet RDNT. While Addus HomeCare sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and RadNet carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Addus HomeCare has an estimated long-term growth rate of 12.1%. ADUS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 11.5%.
Addus HomeCare shares have rallied 85.5% compared with the industry's 16.9% growth year to date.
Quest Diagnostics has an estimated long-term growth rate of 6.8%. DGX's earnings surpassed estimates in each of the trailing four quarters, with the average being 3.3%.
Quest Diagnostics has gained 42% compared with the industry's 14.9% growth year to date.
RadNet’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 98.2%.
RDNT's shares have surged 93.7% year to date compared with the industry’s 14.8% growth.
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